by Calculated Risk on 6/20/2024 07:51:00 PM

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

Friday:
• At 10:00 AM ET, Existing Home Sales for May from the National Association of Realtors (NAR). The consensus is for 4.10 million SAAR, down from 4.14 million.

by Calculated Risk on 6/20/2024 12:45:00 PM

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 April, Realtor.com reported inventory was up 35.2% YoY, but still down almost 34% compared to April 2017 to 2019 levels. 

 Now - on a weekly basis - inventory is up 36.0% YoY.

Realtor.com has monthly and weekly data on the existing home market. Here is their weekly report: Weekly Housing Trends View—Data for Week Ending June 15, 2024

• Active inventory increased, with for-sale homes 36.0% above year-ago levels.

For the 32nd straight week, there were more homes listed for sale versus the prior year, giving homebuyers more options. This past week, the inventory of homes for sale grew by 36.0% compared with last year, maintaining the same rate of growth as the previous week.

• New listings–a measure of sellers putting homes up for sale–were up this week, by 8.0% from one year ago.

Seller activity continued to climb annually last week, matching last week’s annual growth rate of 8%. These past few months sellers have been particularly sensitive to mortgage rates, with newly listed homes being one of the first metrics to respond to the small fluctuations seen in mortgage rates in recent months. If the promising inflation readings seen in May continue, it could lead to softening rates and increase in seller interest toward the latter half of the year. Meanwhile, newly listed homes remained approximately 22% below pre-pandemic (2017 to 2019) levels.

Here is a graph of the year-over-year change in inventory according to realtor.com. 

Inventory was up year-over-year for the 32nd consecutive week.  

However, inventory is still historically low.

New listings remain below typical pre-pandemic levels although up year-over-year.

by Calculated Risk on 6/20/2024 09:12:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Single Family Starts Down Slightly Year-over-year in May; Multi-Family Starts Down 50%

A brief excerpt:

Total housing starts in May were below expectations, however, starts in March and April were revised up slightly, combined.

The third graph shows the month-to-month comparison for total starts between 2023 (blue) and 2024 (red).

Total starts were down 19.3% in May compared to May 2023.  Note that starts in May 2023 were very strong, so the year-over-year comparison was difficult.

The YoY decline in total starts was mostly due to the sharp YoY decrease in multi-family starts, although single family starts were down slightly YoY following 10 months of year-over-year increases.

There is much more in the article.

by Calculated Risk on 6/20/2024 08:32:00 AM

From the Census Bureau: Permits, Starts and Completions

Housing Starts:
Privately‐owned housing starts in May were at a seasonally adjusted annual rate of 1,277,000. This is 5.5 percent below the revised April estimate of 1,352,000 and is 19.3 percent below the May 2023 rate of 1,583,000. Single‐family housing starts in May were at a rate of 982,000; this is 5.2 percent below the revised April figure of 1,036,000. The May rate for units in buildings with five units or more was 278,000.

Building Permits:
Privately‐owned housing units authorized by building permits in May were at a seasonally adjusted annual rate of 1,386,000. This is 3.8 percent below the revised April rate of 1,440,000 and is 9.5 percent below the May 2023 rate of 1,532,000. Single‐family authorizations in May were at a rate of 949,000; this is 2.9 percent below the revised April figure of 977,000. Authorizations of units in buildings with five units or more were at a rate of 382,000 in May.
emphasis added

Click on graph for larger image.

The first graph shows single and multi-family housing starts since 2000.

Multi-family starts (blue, 2+ units) decreased in May compared to April.   Multi-family starts were down 49.5% year-over-year.

Single-family starts (red) decreased in May and were down 1.7% year-over-year.

The second graph shows single and multi-family housing starts since 1968.

This shows the huge collapse following the housing bubble, and then the eventual recovery - and the recent collapse and recovery in single-family starts.

Total housing starts in May were below expectations, however, starts in March and April were revised up, combined.

I'll have more later …

by Calculated Risk on 6/20/2024 08:30:00 AM

The DOL reported:

In the week ending June 15, the advance figure for seasonally adjusted initial claims was 238,000, a decrease of 5,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 242,000 to 243,000. The 4-week moving average was 232,750, an increase of 5,500 from the previous week's revised average. The previous week's average was revised up by 250 from 227,000 to 227,250.
emphasis added

The following graph shows the 4-week moving average of weekly claims since 1971.

Click on graph for larger image.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims increased to 232,750.

The previous week was revised up.

Weekly claims were close to the consensus forecast.

by Calculated Risk on 6/19/2024 07:52:00 PM

Thursday:
• At 8:30 AM ET, Housing Starts for May.  The consensus is for 1.380 million SAAR, up from 1.360 million SAAR in April.

• Also, at 8:30 AM, The initial weekly unemployment claims report will be released.  The consensus is for 240 thousand initial claims, down from 242 thousand last week.

• Also, at 8:30 AM, the Philly Fed manufacturing survey for June. The consensus is for a reading of 4.5, unchanged from 4.5 last month.

by Calculated Risk on 6/19/2024 01:51:00 PM

Yesterday, Goldman Sachs Chief Economist Jan Hatzius wrote:

Last week's benign US inflation data reinforced our view that the Q1 spike was an aberration. Meanwhile, the labor market stands at a potential inflection point where a further softening in labor demand would hit actual jobs, not just open positions, and could therefore push up the unemployment rate more significantly. We thus continue to expect two Fed rate cuts this year (in September and December) ...
emphasis added

The "Art of the Soft Landing" requires that the Fed reduce rates quick enough to keep economic growth positive, and slow enough not to reignite inflation.  My view is a soft landing is achieved if growth stays positive, inflation returns to target, and the yield curve flattens or reverts to normal (long yields higher than short yields).

The good news is growth has stayed positive and inflation has moved closer to the 2% target.  However, the yield curve is still inverted, and we are not out of the woods yet.

Here is a graph of 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity from FRED since 1976.  

Click here for interactive graph at FRED.

If Hatzius is correct that the reported pickup in Q1 inflation was an "aberration", it seems like the FOMC will cut rates soon (probably September).

Most market participants expect 2 rate cuts this year, with the first cut in September. 

by Calculated Risk on 6/19/2024 10:00:00 AM

The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 43, down from 45 last month. Any number below 50 indicates that more builders view sales conditions as poor than good.

From the NAHB: High Mortgage Rates Act as a Drag on Builder Confidence

Mortgage rates that continue to hover in the 7% range along with elevated construction financing costs continue to put a damper on builder sentiment.

Builder confidence in the market for newly built single-family homes was 43 in June, down two points from May, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released today. This is the lowest reading since December 2023.

“Persistently high mortgage rates are keeping many prospective buyers on the sidelines,” said NAHB Chairman Carl Harris, a custom home builder from Wichita, Kan. “Home builders are also dealing with higher rates for construction and development loans, chronic labor shortages and a dearth of buildable lots.”

“We are in an unusual situation because a lack of progress on reducing shelter inflation, which is currently running at a 5.4% year-over-year rate, is making it difficult for the Federal Reserve to achieve its target inflation rate of 2%,” said NAHB Chief Economist Robert Dietz. “The best way to bring down shelter inflation and push the overall inflation rate down to the 2% range is to increase the nation’s housing supply. A more favorable interest rate environment for construction and development loans would help to achieve this aim.”

The June HMI survey also revealed that 29% of builders cut home prices to bolster sales in June, the highest share since January 2024 (31%) and well above the May rate of 25%. However, the average price reduction in June held steady at 6% for the 12th straight month. Meanwhile, the use of sales incentives ticked up to 61% in June from a reading of 59% in May. This metric is at its highest share since January 2024 (62%).
...
All three HMI component indices posted declines in June and all are below the key threshold of 50 for the first time since December 2023. The HMI index charting current sales conditions in June fell three points to 48, the component measuring sales expectations in the next six months fell four points to 47 and the gauge charting traffic of prospective buyers declined two points to 28.

Looking at the three-month moving averages for regional HMI scores, the Northeast held steady at 62, the Midwest dropped three points to 47, the South decreased three points to 46 and the West posted a two-point decline to 41.
emphasis added

Click on graph for larger image.

This graph shows the NAHB index since Jan 1985.

This was below the consensus forecast.

by Calculated Risk on 6/19/2024 07:00:00 AM

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

Mortgage applications increased 0.9 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Applications Survey for the week ending June 14, 2024.

The Market Composite Index, a measure of mortgage loan application volume, increased 0.9 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 0.1 percent compared with the previous week. The Refinance Index decreased 0.4 percent from the previous week and was 30 percent higher than the same week one year ago. The seasonally adjusted Purchase Index increased 2 percent from one week earlier. The unadjusted Purchase Index decreased 0.1 percent compared with the previous week and was 12 percent lower than the same week one year ago.

“Mortgage rates dropped last week following the latest inflation data and the FOMC meeting, with the 30- year conforming rate dropping to 6.94 percent and reaching its lowest level since the end of March,” said Mike Fratantoni, MBA’s SVP and Chief Economist. “Purchase applications increased a small amount for the week, led by applications for conventional loans. Refinance application volume was also down slightly for the week but remains about 30 percent higher than this time last year.”

Added Fratantoni, “Purchase volume is still more than 10 percent behind last year’s pace, but MBA is forecasting a pickup in home sales for the remainder of the year as more inventory is hitting the market.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased to 6.94 percent from 7.02 percent, with points decreasing to 0.61 from 0.65 (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 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.  

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.

by Calculated Risk on 6/18/2024 07:27:00 PM

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

Wednesday:
• All US markets will be closed in observance of Juneteenth National Independence Day

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

• At 10:00 AM, The June NAHB homebuilder survey. The consensus is for a reading of 46, up from 45 last month. Any number above 50 indicates that more builders view sales conditions as poor than good.