by Calculated Risk on 3/13/2024 02:46:00 PM

Today, in the Calculated Risk Real Estate Newsletter: Part 1: Current State of the Housing Market; Overview for mid-March 2024

A brief excerpt:

This 2-part overview for mid-March provides a snapshot of the current housing market.

I always like to start with inventory, since inventory usually tells the tale!
...
Here is a graph of new listing from Realtor.com’s February 2024 Monthly Housing Market Trends Report showing new listings were up 11.3% year-over-year in February. This is still well below pre-pandemic levels. From Realtor.com:

However, providing a boost to overall inventory, sellers turned out in higher numbers this February as newly listed homes were 11.3% above last year’s levels. This marked the fourth month of increasing listing activity after a 17-month streak of decline.

Note the seasonality for new listings. December and January are seasonally the weakest months of the year for new listings, followed by February and November. New listings will be up year-over-year in 2024, but we will have to wait for the March and April data to see how close new listings are to normal levels.

There are always people that need to sell due to the so-called 3 D’s: Death, Divorce, and Disease. Also, in certain times, some homeowners will need to sell due to unemployment or excessive debt (neither is much of an issue right now).

And there are homeowners who want to sell for a number of reasons: upsizing (more babies), downsizing, moving for a new job, or moving to a nicer home or location (move-up buyers). It is some of the “want to sell” group that has been locked in with the golden handcuffs over the last couple of years, since it is financially difficult to move when your current mortgage rate is around 3%, and your new mortgage rate will be in the 6 1/2% to 7% range.

But time is a factor for this “want to sell” group, and eventually some of them will take the plunge. That is probably why we are seeing more new listings now.

There is much more in the article.

by Calculated Risk on 3/13/2024 09:40:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Q4 Update: Delinquencies, Foreclosures and REO

A brief excerpt:

I’ve argued repeatedly that we would NOT see a surge in foreclosures that would significantly impact house prices (as happened following the housing bubble). The two key reasons are mortgage lending has been solid, and most homeowners have substantial equity in their homes..
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And on mortgage rates, here is some data from the FHFA’s National Mortgage Database showing the distribution of interest rates on closed-end, fixed-rate 1-4 family mortgages outstanding at the end of each quarter since Q1 2013 through Q3 2023 (Q4 2023 data will be released in a two weeks).

This shows the surge in the percent of loans under 3%, and also under 4%, starting in early 2020 as mortgage rates declined sharply during the pandemic. Currently 22.6% of loans are under 3%, 59.4% are under 4%, and 78.7% are under 5%.

With substantial equity, and low mortgage rates (mostly at a fixed rates), few homeowners will have financial difficulties.

There is much more in the article. You can subscribe at https://calculatedrisk.substack.com/

by Calculated Risk on 3/13/2024 07:00:00 AM

From the MBA: Mortgage Applications Increase in Latest MBA Weekly Survey

Mortgage applications increased 7.1 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 8, 2024.

The Market Composite Index, a measure of mortgage loan application volume, increased 7.1 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 8 percent compared with the previous week. The Refinance Index increased 12 percent from the previous week and was 5 percent higher than the same week one year ago. The seasonally adjusted Purchase Index increased 5 percent from one week earlier. The unadjusted Purchase Index increased 6 percent compared with the previous week and was 11 percent lower than the same week one year ago.

“Mortgage rates dropped below 7 percent last week for most loan types because of incoming economic data showing a weaker service sector and a less robust job market, with an increase in the unemployment rate and downward revisions to job growth in prior months,” said Mike Fratantoni, MBA’s SVP and Chief Economist. “Purchase application volume increased for the week but remains about 11 percent below last year’s level. By contrast, refinance volume picked up by 12 percent, with a larger, 24 percent increase in the government refinance index. While these percentage increases are large, the level of refinance activity remains quite low, and we expect that most of this activity reflects borrowers who took out a loan at or near the peak of rates in the past two years.”
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The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased to 6.84 percent from 7.02 percent, with points decreasing to 0.65 from 0.67 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added

Click on graph for larger image.

The first graph shows the MBA mortgage purchase index.

According to the MBA, purchase activity is down 11% year-over-year unadjusted.  

Red is a four-week average (blue is weekly).  

Purchase application activity is up slightly from the lows in late October 2023, and below the lowest levels during the housing bust.  

The second graph shows the refinance index since 1990.

With higher mortgage rates, the refinance index declined sharply in 2022, and has mostly flatlined since then.

by Calculated Risk on 3/12/2024 08:10:00 PM

Note: Mortgage rates are from MortgageNewsDaily.com and are for top tier scenarios.

Wednesday:
• At 7:00 AM ET, The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

by Calculated Risk on 3/12/2024 03:27:00 PM

The BLS reported 275 thousand non-farm jobs were added in February.   During the Winter months, I like to look at the weather impact on the report.

The BLS reported 243 thousand people were employed in non-agriculture industries, with a job, but not at work due to bad weather. The average for February over the previous 10 years was 368 thousand (median 272 thousand), so fewer people than normal were impacted by bad weather.

The BLS also reported 633 thousand people that are usually full-time employees were working part time in February due to bad weather.  The average for February over the previous 10 years was 1.55 million (the median was 694 thousand).  This series suggests weather positively impacted employment more than usual.

The San Francisco Fed estimates Weather-Adjusted Change in Total Nonfarm Employment (monthly change, seasonally adjusted). They use local area weather to estimate the impact on employment. For February, the San Francisco Fed estimated that weather boosted employment by about 100 thousand jobs.

by Calculated Risk on 3/12/2024 12:47:00 PM

Today, in the Calculated Risk Real Estate Newsletter: 2nd Look at Local Housing Markets in February

A brief excerpt:

NOTE: The tables for active listings, new listings and closed sales all include a comparison to February 2019 for each local market (some 2019 data is not available).

This is the second look at several local markets in February. I’m tracking about 40 local housing markets in the US. Some of the 40 markets are states, and some are metropolitan areas. I’ll update these tables throughout the month as additional data is released.

Closed sales in February were mostly for contracts signed in December and January when 30-year mortgage rates averaged 6.82% and 6.64%, respectively. This is down from the 7%+ mortgage rates in the August through November period.
...
Here is a summary of active listings for these early reporting housing markets in February.

Inventory for these markets were up 12.4% year-over-year in January and are now up 23.8% year-over-year. A key will be if inventory builds over the next few months. Yesterday, Mike Simonson, President of Altos Research wrote: “The market could peak at 40% inventory growth over last year.”

Special Note: Florida is overweighted in this early sample, and that has distorted the overall picture (since inventory is surging in Florida).

Inventory is down in most of these areas compared to 2019.
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Many more local markets to come!

There is much more in the article.

by Calculated Risk on 3/12/2024 11:15:00 AM

The Cleveland Fed released the median CPI and the trimmed-mean CPI.

According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.4% in February. The 16% trimmed-mean Consumer Price Index increased 0.3%. "The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics’ (BLS) monthly CPI report".

Click on graph for larger image.

This graph shows the year-over-year change for these four key measures of inflation. 

On a year-over-year basis, the median CPI rose 4.6% (down from 4.9% in January), the trimmed-mean CPI rose 3.5% (down from 3.7%), and the CPI less food and energy rose 3.8% (down from 3.9%). 

Core PCE is for January was up 2.8% YoY, down from 2.9% in December.

Note: The Cleveland Fed released the median CPI details. The volatile "Motor fuel" increased at a 54% annual rate in February. 

Rent and Owner's equivalent rent are still very high, and if we exclude rent, median CPI would be around 1.8% year-over-year. 

by Calculated Risk on 3/12/2024 08:53:00 AM

Here are a few measures of inflation:

The first graph is the one Fed Chair Powell had mentioned when services less rent of shelter was up around 8% year-over-year.  This declined and is now up 3.9% YoY (increased recently).

Click on graph for larger image.

This graph shows the YoY price change for Services and Services less rent of shelter through February 2024.

Services were up 5.0% YoY as of February 2024, unchanged from 5.0% YoY in January.

Services less rent of shelter was up 3.9% YoY in February, up from 3.6% YoY in January.

The second graph shows that goods prices started to increase year-over-year (YoY) in 2020 and accelerated in 2021 due to both strong demand and supply chain disruptions.

Durables were at -1.6% YoY as of February 2024, unchanged from -1.6% YoY in January.

Commodities less food and energy commodities were down 0.3% YoY in February, unchanged from down 0.3% YoY in January.

Here is a graph of the year-over-year change in shelter from the CPI report (through February) and housing from the PCE report (through January)

Shelter was up 5.8% year-over-year in February, down from 6.1% in January. Housing (PCE) was up 6.1% YoY in January, down from 6.3% in December.

This is still catching up with private data.  The BLS noted this morning: "The index for shelter rose in February, as did the index for gasoline. Combined, these two indexes contributed over sixty percent of the monthly increase in the index for all items."

Core CPI ex-shelter was up 2.2% YoY in January, unchanged from 2.2% in February.

by Calculated Risk on 3/12/2024 08:30:00 AM

From the BLS:

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.4 percent in February on a seasonally adjusted basis, after rising 0.3 percent in January, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 3.2 percent before seasonal adjustment.

The index for shelter rose in February, as did the index for gasoline. Combined, these two indexes contributed over sixty percent of the monthly increase in the index for all items. The energy index rose 2.3 percent over the month, as all of its component indexes increased. The food index was unchanged in February, as was the food at home index. The food away from home index rose 0.1 percent over the month.

The index for all items less food and energy rose 0.4 percent in February, as it did in January. Indexes which increased in February include shelter, airline fares, motor vehicle insurance, apparel, and recreation. The index for personal care and the index for household furnishings and operations were among those that decreased over the month.

The all items index rose 3.2 percent for the 12 months ending February, a larger increase than the 3.1-percent increase for the 12 months ending January. The all items less food and energy index rose 3.8 percent over the last 12 months. The energy index decreased 1.9 percent for the 12 months ending February, while the food index increased 2.2 percent over the last year.
emphasis added

The change in both CPI and core CPI were slightly above expectations. I'll post a graph later today after the Cleveland Fed releases the median and trimmed-mean CPI.

by Calculated Risk on 3/11/2024 07:52:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rate Winning Streak Finally Pauses, But Just Barely

Mortgage rates hit their best levels in more than a month by the end of last week after moving lower for 4 straight days. If you could only know one thing about today, it's that although rates didn't extend their winning streak, they are still very close to Friday's levels--close enough that the typical borrower wouldn't care or notice.
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[A]ll eyes are on CPI tomorrow. If it comes in much higher or lower than expected, rates will likely react in a major way. [30 year fixed 6.87%]
emphasis added

Tuesday:
• At 6:00 AM ET, NFIB Small Business Optimism Index for February.

• At 8:30 AM, The Consumer Price Index for February from the BLS. The consensus is for a 0.4% increase in CPI, and a 0.3% increase in core CPI.  The consensus is for CPI to be up 3.1% Year-over-year (YoY), and core CPI to be up 3.7% YoY.