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Wednesday, June 12, 2024

YoY Measures of Inflation: Services, Goods and Shelter

by Calculated Risk on 6/12/2024 08:50:00 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, but has turned up recently, and is now up 5.0% YoY.

Services ex-ShelterClick on graph for larger image.

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


Services were up 5.2% YoY as of May 2024, unchanged from 5.2% YoY in April.

Services less rent of shelter was up 5.0% YoY in May, up from 4.9% YoY in April.

Goods CPIThe 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 -3.7% YoY as of May 2024, down from -3.2% YoY in April.

Commodities less food and energy commodities were at -1.7% YoY in May, down from -1.2% YoY in April.

ShelterHere is a graph of the year-over-year change in shelter from the CPI report (through May) and housing from the PCE report (through April)

Shelter was up 5.4% year-over-year in May, down from 5.5% in April. Housing (PCE) was up 5.6% YoY in April, down slightly from 5.8% in March.

This is still catching up with private data.  The BLS noted this morning: "the index for shelter rose in May, up 0.4 percent for the fourth consecutive month."

Core CPI ex-shelter was up 1.9% YoY in May, down from 2.1% in April.

BLS: CPI Unchanged in May; Core CPI increased 0.2%

by Calculated Risk on 6/12/2024 08:30:00 AM

From the BLS:

The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in May on a seasonally adjusted basis, after rising 0.3 percent in April, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 3.3 percent before seasonal adjustment.

More than offsetting a decline in gasoline, the index for shelter rose in May, up 0.4 percent for the fourth consecutive month. The index for food increased 0.1 percent in May. The food away from home index rose 0.4 percent over the month, while the food at home index was unchanged. The energy index fell 2.0 percent over the month, led by a 3.6-percent decrease in the gasoline index.

The index for all items less food and energy rose 0.2 percent in May, after rising 0.3 percent the preceding month. Indexes which increased in May include shelter, medical care, used cars and trucks, and education. The indexes for airline fares, new vehicles, communication, recreation, and apparel were among those that decreased over the month.

The all items index rose 3.3 percent for the 12 months ending May, a smaller increase than the 3.4-percent increase for the 12 months ending April. The all items less food and energy index rose 3.4 percent over the last 12 months. The energy index increased 3.7 percent for the 12 months ending May. The food index increased 2.1 percent over the last year.
emphasis added
The change in both CPI and core CPI were below expectations. I'll post a graph later today after the Cleveland Fed releases the median and trimmed-mean CPI.

MBA: Mortgage Applications Increased in Weekly Survey

by Calculated Risk on 6/12/2024 07:00:00 AM

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

Mortgage applications increased 15.6 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Applications Survey for the week ending June 7, 2024.

The Market Composite Index, a measure of mortgage loan application volume, increased 15.6 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 26 percent compared with the previous week. The Refinance Index increased 28 percent from the previous week and was 28 percent higher than the same week one year ago. The seasonally adjusted Purchase Index increased 9 percent from one week earlier. The unadjusted Purchase Index increased 19 percent compared with the previous week and was 12 percent lower than the same week one year ago.

“Mortgage rates were trending lower over the course of last week until a stronger than anticipated employment report resulted in a bounce back, with the weekly average for the 30- year fixed mortgage rate decreasing to 7.02 percent,” said Mike Fratantoni, MBA’s SVP and Chief Economist. “Lower rates earlier in the week meant a strong increase in refinance activity, particularly for VA borrowers, who jumped on the chance to lower their rates. Overall refinance activity was more than 27 percent above one year ago.”

Added Fratantoni, “On a seasonally adjusted basis and compared to the holiday-adjusted level from the prior week, purchase activity also increased. Multiple data sources are now indicating that home inventory levels, while still historically low, are up significantly from last year at this time. This is good news for many prospective homebuyers who have been frustrated by the lack of homes on the market.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased to 7.02 percent from 7.07 percent, with points unchanged at 0.65 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added
Mortgage Purchase IndexClick on graph for larger image.

The first graph shows the MBA mortgage purchase index.

According to the MBA, purchase activity is down 12% 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.  

Mortgage Refinance Index
The second graph shows the refinance index since 1990.

With higher mortgage rates, the refinance index declined sharply in 2022, and mostly flat lined since then with a slight increase recently.

Tuesday, June 11, 2024

Wednesday: CPI, FOMC Statement

by Calculated Risk on 6/11/2024 07:11:00 PM

Mortgage Rates 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.

• At 8:30 AM, The Consumer Price Index for May from the BLS. The consensus is for 0.2% increase in CPI (up 3.4% YoY), and a 0.3% increase in core CPI (up 3.5% YoY).

• At 2:00 PM, FOMC Statement. The FOMC is expected to leave the Fed Funds rate unchanged at this meeting.

• Also at 2:00 PM, FOMC Projections This will include the Federal Open Market Committee (FOMC) participants' projections of the appropriate target federal funds rate along with the quarterly economic projections.

• At 2:30 PM, Fed Chair Jerome Powell holds a press briefing following the FOMC announcement.

CPI Previews

by Calculated Risk on 6/11/2024 02:15:00 PM

The key economic report this week is May CPI to be released tomorrow. The consensus is for 0.2% increase in CPI (up 3.4% YoY unchanged from April), and a 0.3% increase in core CPI (up 3.5% YoY, down from 3.6% YoY in April).

From BofA:

After averaging 0.4% m/m in January through March, inflation took a small step in the right direction in April with core Consumer Price Inflation (CPI) and Personal Consumption Expenditure Inflation (PCE) both decelerating to 0.3% m/m (core PCE inflation was 0.26% rounded to two decimals).

We think May follows suit and our forecast is for core and headline CPI inflation rising by 0.3% (0.30% to two decimals) and 0.1% m/m. This would leave core and headline up 3.6% and 3.4% y/y, respectively, both unchanged from April levels.
From Goldman:
We expect a 0.25% increase in May core CPI (vs. 0.3% consensus), corresponding to a year-over-year rate of 3.50% (vs. 3.5% consensus). We expect a 0.11% increase in May headline CPI (vs. 0.1% consensus), which corresponds to a year-over-year rate of 3.36% (vs. 3.4% consensus). Our forecast is consistent with a 0.20% increase in CPI core services excluding rent and owners’ equivalent rent and with a 0.19% increase in core PCE in May.

2nd Look at Local Housing Markets in May

by Calculated Risk on 6/11/2024 11:18:00 AM

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

A brief excerpt:

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

This is the second look at several early reporting local markets in May. I’m tracking over 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 May were mostly for contracts signed in March and April when 30-year mortgage rates averaged 6.82% and 6.99%, respectively (Freddie Mac PMMS). This is down from the 7%+ mortgage rates in the August through November period (although rates are now back above 7% again).
...
Closed Existing Home SalesIn May, sales in these markets were up 1.5% YoY. Last month, in April, these same markets were up 7.9% year-over-year Not Seasonally Adjusted (NSA).

Sales in all of these markets are down compared to May 2019.
...
This is a small year-over-year increase NSA for these markets. There were the same number of working days in May 2024 compared to May 2023, so the year-over-year change in the seasonally adjusted sales will be about the same as the NSA data suggests.
...
Many more local markets to come!
There is much more in the article.

Hotels: Occupancy Rate Increased 0.9% Year-over-year

by Calculated Risk on 6/11/2024 08:11:00 AM

Due to Memorial Day, the U.S. hotel industry reported lower performance results from the previous week but slightly positive comparisons year over year, according to CoStar’s latest data through 1 June. ...

26 May through 1 June 2024 (percentage change from comparable week in 2023):

Occupancy: 62.0% (+0.9%)
• Average daily rate (ADR): US$150.87 (+0.1%)
• Revenue per available room (RevPAR): US$93.50 (+1.0%)
emphasis added
The following graph shows the seasonal pattern for the hotel occupancy rate using the four-week average.

Hotel Occupancy RateClick on graph for larger image.

The red line is for 2024, blue is the median, and dashed light blue is for 2023.  Dashed purple is for 2018, the record year for hotel occupancy. 

The 4-week average of the occupancy rate is tracking last year and is slightly above the median rate for the period 2000 through 2023 (Blue).

Note: Y-axis doesn't start at zero to better show the seasonal change.

The 4-week average of the occupancy rate will now increase seasonally with the summer travel season.

Monday, June 10, 2024

"Mortgage Rates Slightly Higher to Start Pivotal Week"

by Calculated Risk on 6/10/2024 06:26:00 PM

Mortgage Rates From Matthew Graham at Mortgage News Daily: Mortgage Rates Slightly Higher to Start Pivotal Week

The event calendar ramps up quickly from here and Wednesday will be the most important day of the month due to the release of pivotal inflation data and an updated rate announcement and outlook from the Fed. While there's no chance of a rate cut or hike at this meeting, we should get more clarity on the Fed's interpretation of the very latest trends in inflation. [30 year fixed 7.17%]
emphasis added
Tuesday:
• At 6:00 AM ET, NFIB Small Business Optimism Index for April.

Q1 Update: Delinquencies, Foreclosures and REO

by Calculated Risk on 6/10/2024 01:17:00 PM

Today, in the Calculated Risk Real Estate Newsletter: Q1 Update: Delinquencies, Foreclosures and REO

A brief excerpt:

We will NOT see a surge in foreclosures that would significantly impact house prices (as happened following the housing bubble) for two key reasons: 1) mortgage lending has been solid, and 2) most homeowners have substantial equity in their homes.
...
FHFA Percent Mortgage Rate First LienAnd 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 Q4 2023 (Q1 2024 data will be released in three 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 22.2% of loans are under 3%, 58.1% are under 4%, and 77.0% 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/

AAR: Rail Carloads Down YoY in May, Intermodal Up

by Calculated Risk on 6/10/2024 11:12:00 AM

From the Association of American Railroads (AAR) Rail Time Indicators. Graphs and excerpts reprinted with permission.

Total U.S. carloads were down 6.0% in May 2024 from May 2023, their fifth straight year-over-year decline. Year-to-date total carloads through May were down 5.0%, or 247,984 carloads, from last year and were the lowest in our records that go back to 1988.

We’ve said it before and we’ll say it again: it’s coal’s fault. Coal averaged 49,239 carloads per week in May 2024, down 22.0% from last year and its fifth straight double-digit percentage decline. In our records, only May 2020 and April 2024 had fewer coal carloads. Year-to-date coal carloads in 2024 through May were down 18.3%, or 263,128 carloads, from last year. Still, coal remains the single highest volume carload commodity for U.S. railroads (25% of carloads so far this year).
emphasis added
Rail Traffic Click on graph for larger image.

This graph from the Rail Time Indicators report shows the six-week average of U.S. Carloads in 2022, 2023 and 2024:
Total originated carloads on U.S. railroads in May 2024 were down 6.0%, or 67,145 carloads, from May 2023. The weekly average in May 2024 was 212,160 carloads, virtually the same as in April 2024.

Year-to-date total carloads in 2024 through May were down 5.0% (247,984 carloads) from the same period last year and down 4.4% from the same period in 2022.
Rail TrafficThe second graph shows the six-week average (not monthly) of U.S. intermodal in 2022, 2023 and 2024: (using intermodal or shipping containers):
U.S. intermodal volume in May 2024 was up 7.6% (90,744 containers and trailers) over May 2023, its ninth straight gain. Year-to-date intermodal volume through May was 5.57 million units, up 8.7% (443,453 units) over last year but down 3.1% (180,434 units) from 2022.