by Calculated Risk on 3/05/2024 11:41:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Inflation Adjusted House Prices 2.4% Below Peak

Excerpt:

It has been over 17 years since the bubble peak. In the December Case-Shiller house price index released last week, the seasonally adjusted National Index (SA), was reported as being 70% above the bubble peak in 2006. However, in real terms, the National index (SA) is about 10% above the bubble peak (and historically there has been an upward slope to real house prices).  The composite 20, in real terms, is 1% above the bubble peak.

People usually graph nominal house prices, but it is also important to look at prices in real terms.  As an example, if a house price was $300,000 in January 2010, the price would be $426,000 today adjusted for inflation (42% increase).  That is why the second graph below is important - this shows "real" prices.

The third graph shows the price-to-rent ratio, and the fourth graph is the affordability index. The last graph shows the 5-year real return based on the Case-Shiller National Index.
...
The second graph shows the same two indexes in real terms (adjusted for inflation using CPI).

In real terms (using CPI), the National index is 2.4% below the recent peak, and the Composite 20 index is 3.2% below the recent peak in 2022. Both indexes declined slightly in December in real terms.

In real terms, national house prices are 10.2% above the bubble peak levels. There is an upward slope to real house prices, and it has been over 17 years since the previous peak, but real prices are historically high.

There is much more in the article.

by Calculated Risk on 3/05/2024 10:00:00 AM

(Posted with permission). The ISM® Services index was at 52.6%, down from 53.4% last month. The employment index decreased to 48.0%, from 50.5%. Note: Above 50 indicates expansion, below 50 in contraction.

From the Institute for Supply Management: Services PMI® at 52.6% February 2024 Services ISM® Report On Business®

Economic activity in the services sector expanded in February for the 14th consecutive month as the Services PMI® registered 52.6 percent, say the nation's purchasing and supply executives in the latest Services ISM® Report On Business®. The sector has grown in 44 of the last 45 months, with the lone contraction in December 2022.

The report was issued today by Anthony Nieves, CPSM, C.P.M., A.P.P., CFPM, Chair of the Institute for Supply Management® (ISM®) Services Business Survey Committee: “In February, the Services PMI® registered 52.6 percent, 0.8 percentage point lower than January’s reading of 53.4 percent. The composite index indicated growth in February for the 14th consecutive month after a reading of 49 percent in December 2022, which was the first contraction since May 2020 (45.4 percent). The Business Activity Index registered 57.2 percent in February, which is 1.4 percentage points higher than the 55.8 percent recorded in January. The New Orders Index expanded in February for the 14th consecutive month after contracting in December 2022 for the first time since May 2020; the figure of 56.1 percent is 1.1 percentage points higher than the January reading of 55 percent. The Employment Index contracted for the second time in three months with a reading of 48 percent, a 2.5-percentage point decrease compared to the 50.5 percent recorded in January.
emphasis added

The PMI was slightly below expectations.

by Calculated Risk on 3/05/2024 08:55:00 AM

Notes: This CoreLogic House Price Index report is for January. The recent Case-Shiller index release was for December. The CoreLogic HPI is a three-month weighted average and is not seasonally adjusted (NSA).

From CoreLogic: CoreLogic: Annual US Home Price Growth Moves Up Gradually Again in January

• U.S. single-family home prices (including distressed sales) increased by 5.8% year over year in January 2024 compared with January 2023. On a month-over-month basis, home prices increased by 0.1% compared with December 2023.

• In January, the annual appreciation of detached properties (6%) was 1.1 percentage points higher than that of attached properties (4.9%).

• CoreLogic’s forecast shows annual U.S. home price gains relaxing to 2.6% in January 2025.

• Miami posted the highest year-over-year home price increase of the country’s 10 highlighted metro areas in January, at 10.2%. San Diego saw the next-highest gain at 8.5%.

• Among states, Rhode Island ranked first for annual appreciation in January (up by 13.2%), followed by New Jersey (up by 11.6%) and Connecticut (up by 11%). No states recorded year-over-year home price losses.
...
“U.S. annual home price growth strengthened to 5.8% in January 2024,” said Dr. Selma Hepp, chief economist for CoreLogic. “And while the acceleration continues to reflect the residual impact of strong appreciation in early 2023, the annual rate of growth is expected to taper off in coming months.”

“Home prices further increased in late 2023 despite high mortgage rates, which surged to the highest level since the beginning of the millennium,” Hepp continued. “But metro areas that have struggled with the impact of higher rates continue to see downward movement on home prices. Generally, pressures from higher mortgage rates tend to occur in markets where the higher cost of homeownership pushes against the affordability ceiling.”
emphasis added

by Calculated Risk on 3/04/2024 08:54:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Not Much Higher Than Friday

Mortgage rates were at the best levels in 2 weeks as of last Friday and today's offerings are only modestly higher.
...
The two reports above all others are CPI (the Consumer Price Index) and the big jobs report. CPI caused a stir just before the sideways vibes set in and this Friday's jobs report is just as capable. [30 year fixed 7.09%]
emphasis added

Tuesday:
• At 10:00 AM: the ISM Services Index for February.

by Calculated Risk on 3/04/2024 05:07:00 PM

This morning, the BEA released their estimate of vehicle sales for February.

This graph shows heavy truck sales since 1967 using data from the BEA. The dashed line is the February 2024 seasonally adjusted annual sales rate (SAAR).

Heavy truck sales really collapsed during the great recession, falling to a low of 180 thousand SAAR in May 2009.  Then heavy truck sales increased to a new record high of 570 thousand SAAR in April 2019.

Click on graph for larger image.

Note: "Heavy trucks - trucks more than 14,000 pounds gross vehicle weight."

Heavy truck sales declined sharply at the beginning of the pandemic, falling to a low of 308 thousand SAAR in May 2020.  

Heavy truck sales were at 530 thousand SAAR in February, up from 506 thousand in January, and up 5.4% from 503 thousand SAAR in February 2023.  

Usually, heavy truck sales decline sharply prior to a recession.   Heavy truck sales are solid.

by Calculated Risk on 3/04/2024 02:20:00 PM

Today, in the Real Estate Newsletter: Lawler: Some Thoughts on Quantitative Easing and Quantitative Tightening

Brief excerpt:

Now let’s look at MBS. Below is a table showing Agency MBS outstanding Agency MBS held by the public, and Agency MBS held by the private sector. (Again, the Fed holdings are as of the last Wednesday in December).

The Fed’s share of total Agency MBS outstanding hit a year-end high of 32% at the end of 2021 and was still above 27% at the end of last year. Again, Fed MBS purchases essentially involved taking longer-maturity fixed-rate MBS held by the public and “replacing” them with extremely short-term bank reserves/deposits at the Fed, thus reducing NOT the amount of government obligations held by the private sector, but significantly reducing the maturity/duration of government obligations held by the private sector.

Computing the impact of Fed MBS purchases on the maturity of government obligations held by the private sector is more challenging for MBS than for Treasuries, as the expected weighted average maturity/duration of MBS are heavily dependent on where interest rates are relative to the interest rates on the mortgages backing MBS.

There is much more in the article.

by Calculated Risk on 3/04/2024 10:47:00 AM

Today, in the Real Estate Newsletter: ICE Mortgage Monitor: "First-Time Homebuyers Make Up Record 47% of GSE Purchase Loans"

Brief excerpt:

Press Release: ICE Mortgage Monitor: First-Time Homebuyers Make Up Record 47% of GSE Purchase Loans, 39% of All 2023 GSE Securitizations in 2023

• Though originations hit a 30-year low in 2023, ICE eMBS data shows first-time homebuyers (FTHB) made up the highest share of agency purchase security issuance in at least 10 years

A large share of GSE purchase loans in 2023 were for first-time homebuyers (FTHBs).

• First time homebuyers made up 55% of agency purchase mortgages in 2023 according to ICE eMBS data, the highest such share in the 10 years ICE has been tracking the metric

• Likewise, first-time homebuyers (FTHBs) accounted for a record 47% of GSE purchase loans in 2023, a number that’s been trending gradually higher throughout the past decade

There is much more in the article.

by Calculated Risk on 3/04/2024 08:21:00 AM

Altos reports that active single-family inventory was up 0.1% week-over-week. It is likely inventory bottomed in mid-February, as opposed to mid-April in 2023, and inventory is now up 0.9% from the 2024 February bottom.

Click on graph for larger image.

This inventory graph is courtesy of Altos Research.

As of March 1st, inventory was at 498 thousand (7-day average), compared to 498 thousand the prior week.   

Inventory is still far below pre-pandemic levels.

The second graph shows the seasonal pattern for active single-family inventory since 2015.

The red line is for 2024.  The black line is for 2019.  Note that inventory is up more than double from the record low for the same week in 2022, but still well below normal levels.

Inventory was up 18.8% compared to the same week in 2023 (last week it was up 15.6%), and down 39.1% compared to the same week in 2019 (last week it was down 39.3%). 

Back in June 2023, inventory was down almost 54% compared to 2019, so the gap to more normal inventory levels has closed a little.

Mike Simonsen discusses this data regularly on Youtube.

by Calculated Risk on 3/03/2024 06:14:00 PM

Weekend:
• Schedule for Week of March 3, 2024

Monday:
• No major economic releases scheduled.

From CNBC: Pre-Market Data and Bloomberg futures S&P 500 and DOW futures are down slightly (fair value).

Oil prices were up over the last week with WTI futures at $79.97 per barrel and Brent at $83.55 per barrel. A year ago, WTI was at $80, and Brent was at $86 - so WTI oil prices are unchanged year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $3.34 per gallon. A year ago, prices were at $3.36 per gallon, so gasoline prices are down $0.02 year-over-year.

by Calculated Risk on 3/03/2024 08:21:00 AM

What this means: On a weekly basis, Realtor.com reports the year-over-year change in active inventory and new listings. On a monthly basis, they report total inventory. For January, Realtor.com reported inventory was up 7.9% YoY, and down 40% compared to January 2019. 

 Now - on a weekly basis - inventory is up 17.8% YoY, and that would still put inventory down about 38% compared to February 2019.

Realtor.com has monthly and weekly data on the existing home market. Here is their weekly report: Weekly Housing Trends View — Data Week Ending February 24, 2024

• Active inventory increased, with for-sale homes 17.8% above year ago levels. For a 16th straight week, active listings registered above prior year level, which means that today’s home shoppers see more for-sale homes. In fact, the January Realtor.com Housing Trends Report showed that 2024 had the most abundant level of inventory in the most recent four years. Nevertheless, the number of homes on the market is still down nearly 40% compared to what was typical in 2017 to 2019.

• New listings–a measure of sellers putting homes up for sale–were up this week, by 11.9% from one year ago. Newly listed homes bested year ago levels for an 18th week in a row. This may be even better news for home shoppers than the overall growth in active inventory because a jump in new listings means new options–vitally important for shoppers with a specific must-have list./blockquote>Here is a graph of the year-over-year change in inventory according to realtor.com. 

Inventory was up year-over-year for the 16th consecutive week following 20 consecutive weeks with a YoY decrease in inventory.  

Inventory is still historically very low.

Although new listings remain well below "typical pre-pandemic levels", new listings are now up YoY for the 18th consecutive week.