by Calculated Risk on 7/01/2024 08:19:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Near Highest Levels in More Than a Month

Mortgage rates continued their frustrating and somewhat perplexing move higher today, thus bringing the average lender close to the highest levels since the end of May. ... Rising rates are always frustrating for those the housing/mortgage markets and prospective borrowers, but an ebb and flow is a way of life. In other words, it's perfectly normal to see good and bad days for rates.

Less normal is the occasional emergence of counterintuitive rate movement. In other words, we are usually able to tie any given drop or surge in rates to one or more root causes that have had similar impacts in the past.

This time around, however, the economic data has been suggesting DOWNWARD pressure on rates over the past two days. That's notable for two reasons: economic data has been a reliable source of guidance and, more importantly, rates have experienced anything but downward pressure over the past two days! [30 year fixed 7.14%]
emphasis added

Tuesday:
• At 9:30 AM ET, Discussion, Fed Chair Jerome Powell, Policy Panel Discussion, At the European Central Bank (ECB) Forum on Central Banking 2024, Sintra, Portugal

• At 10:00 AM, Job Openings and Labor Turnover Survey for May from the BLS.

• Late in the day, Light vehicle sales for June. The consensus is for light vehicle sales to be 15.9 million SAAR in June, unchanged from 15.9 million in May (Seasonally Adjusted Annual Rate).

by Calculated Risk on 7/01/2024 12:26:00 PM

Today, in the Calculated Risk Real Estate Newsletter: FHFA’s National Mortgage Database: Outstanding Mortgage Rates, LTV and Credit Scores

A brief excerpt:

Here are some graphs on outstanding mortgages by interest rate, the average mortgage interest rate, borrowers’ credit scores and current loan-to-value (LTV) from the FHFA’s National Mortgage Database through Q4 2023 (released this morning).
...
Here is some data 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.

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. The percent of outstanding loans under 4% peaked in Q1 2022 at 65.3% (now at 58.1%), and the percent under 5% peaked at 85.6% (now at 77.0%). These low existing mortgage rates makes it difficult for homeowners to sell their homes and buy a new home since their monthly payments would increase sharply. This is a key reason existing home inventory levels are so low. See: "The Lock-In Effect of Rising Mortgage Rates"

The percent of loans over 6% bottomed in Q2 2022 at 7.2% and has increased to 13.4% in Q4 2023.

There is much more in the article.

by Calculated Risk on 7/01/2024 10:15:00 AM

From the Census Bureau reported that overall construction spending decreased:

Construction spending during May 2024 was estimated at a seasonally adjusted annual rate of $2,139.8 billion, 0.1 percent below the revised April estimate of $2,142.1 billion. The May figure is 6.4 percent above the May 2023 estimate of $2,011.8 billion.
emphasis added

Private spending decreased and public spending increased:

Spending on private construction was at a seasonally adjusted annual rate of $1,652.1 billion, 0.3 percent below the revised April estimate of $1,656.7 billion. ...

In May, the estimated seasonally adjusted annual rate of public construction spending was $487.6 billion, 0.5 percent above the revised April estimate of $485.4 billion.

Click on graph for larger image.

This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted.

Residential (red) spending is 6.3% below the recent peak in 2022.

Non-residential (blue) spending is 0.8% below the peak in January 2024.

Public construction spending is at a new high.

The second graph shows the year-over-year change in construction spending.

On a year-over-year basis, private residential construction spending is up 6.5%. Non-residential spending is up 4.1% year-over-year. Public spending is up 9.7% year-over-year.

This was below consensus expectations for 0.3% increase in spending, however, total construction spending for the previous two months was revised up. 

This is probably just the start of weakness for private non-residential construction.

by Calculated Risk on 7/01/2024 10:00:00 AM

(Posted with permission). The ISM manufacturing index indicated expansion. The PMI® was at 48.5% in June, down from 48.7% in May. The employment index was at 49.3%, down from 51.1% the previous month, and the new orders index was at 49.3%, up from 45.4%.

From ISM: Manufacturing PMI® at 48.5% June 2024 Manufacturing ISM® Report On Business®

Economic activity in the manufacturing sector contracted in June for the third consecutive month and the 19th time in the last 20 months, say the nation's supply executives in the latest Manufacturing ISM® Report On Business®.

The report was issued today by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee:

“The Manufacturing PMI® registered 48.5 percent in June, down 0.2 percentage point from the 48.7 percent recorded in May. The overall economy continued in expansion for the 50th month after one month of contraction in April 2020. (A Manufacturing PMI® above 42.5 percent, over a period of time, generally indicates an expansion of the overall economy.) The New Orders Index remained in contraction territory, registering 49.3 percent, 3.9 percentage points higher than the 45.4 percent recorded in May. The June reading of the Production Index (48.5 percent) is 1.7 percentage points lower than May’s figure of 50.2 percent. The Prices Index registered 52.1 percent, down 4.9 percentage points compared to the reading of 57 percent in May. The Backlog of Orders Index registered 41.7 percent, down 0.7 percentage point compared to the 42.4 percent recorded in May. The Employment Index registered 49.3 percent, down 1.8 percentage points from May’s figure of 51.1 percent.
emphasis added

This suggests manufacturing contracted in June.  This was below the consensus forecast.

by Calculated Risk on 7/01/2024 08:12:00 AM

Altos reports that active single-family inventory was up 1.8% week-over-week. Inventory is now up 30.7% from the February seasonal bottom, and at the highest level since July 2020.

Click on graph for larger image.

This inventory graph is courtesy of Altos Research.

As of June 28th, inventory was at 646 thousand (7-day average), compared to 634 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 80% from the record low for the same week in 2021, but still well below normal levels.

Inventory was up 38.4% compared to the same week in 2023 (last week it was up 37.7%), and down 33.2% compared to the same week in 2019 (last week it was down 33.6%). 

Inventory should be above 2020 levels for the same week in two weeks.

Back in June 2023, inventory was down almost 54% compared to 2019, so the gap to more normal inventory levels is slowly closing.

Mike Simonsen discusses this data regularly on Youtube.

by Calculated Risk on 6/30/2024 07:54:00 PM

Weekend:
• Schedule for Week of June 30, 2024

• Final Look at Local Housing Markets in May and a Look Ahead to June Sales

Monday:
• At 10:00 AM ET, ISM Manufacturing Index for June. The consensus is for the ISM to be at 49.0, up from 48.7 in May. 

• Also at 10:00 AM, Construction Spending for May. The consensus is for a 0.3% increase in construction spending.

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

Oil prices were mixed over the last week with WTI futures at $81.54 per barrel and Brent at $85.00 per barrel. A year ago, WTI was at $71, and Brent was at $75 - so WTI oil prices are up about 15% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $3.48 per gallon. A year ago, prices were at $3.50 per gallon, so gasoline prices are down $0.02 year-over-year.

by Calculated Risk on 6/30/2024 02:05:00 PM

Today, in the Calculated Risk Real Estate Newsletter: Final Look at Local Housing Markets in May and a Look Ahead to June Sales

A brief excerpt:

In May, sales in these markets were down 0.1% YoY. In April, these same markets were up 7.6% year-over-year Not Seasonally Adjusted (NSA).

Sales in all of these markets are down compared to May 2019.

This was a 0.1% year-over-year decrease NSA for these markets. This is close to the 1.0% year-over-year decline NSA reported by the NAR reported by the NAR.

June sales will be mostly for contracts signed in April and May, and mortgage rates increased slightly to an average of 7.06% in May. My early expectation is we will see existing home sales at above the same level in June as compared to May, on a seasonally adjusted annual rate basis (SAAR).

Note for next month (June sales): There were two fewer working days in June 2024 compared to June 2023 (19 vs 21), so seasonally adjusted sales will be much higher than the NSA data suggests.

There is much more in the article.

by Calculated Risk on 6/30/2024 08:21:00 AM

From STR: U.S. hotel results for week ending 22 June

The U.S. hotel industry reported lower performance results from the previous week and mixed comparisons year over year, according to CoStar’s latest data through 22 June. ...

16-22 June 2024 (percentage change from comparable week in 2023):

• Occupancy: 69.5% (-2.5%)
• Average daily rate (ADR): US$159.88 (+0.1%)
• Revenue per available room (RevPAR): US$111.17 (-2.3%)
emphasis added

The following graph shows the seasonal pattern for the hotel occupancy rate using the four-week average.

Click 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 just behind last year and is below 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 increase seasonally due to summer recreational travel.

by Calculated Risk on 6/29/2024 02:11:00 PM

At the Calculated Risk Real Estate Newsletter this week:

Click on graph for larger image.

• New Home Sales Decrease to 619,000 Annual Rate in May

• Case-Shiller: National House Price Index Up 6.3% year-over-year in April

• Inflation Adjusted House Prices 2.3% Below Peak

• Watch Months-of-Supply!

• Freddie Mac House Price Index Increased in May; Up 5.9% Year-over-year

This is usually published 4 to 6 times a week and provides more in-depth analysis of the housing market.

by Calculated Risk on 6/29/2024 08:11:00 AM

The key report scheduled for this week is the June employment report to be released on Friday.

Other key reports include the June ISM Manufacturing survey, June Vehicle Sales and the Trade Deficit for May.

----- Monday, July 1st -----
10:00 AM: ISM Manufacturing Index for June. The consensus is for the ISM to be at 49.0, up from 48.7 in May. 

10:00 AM: Construction Spending for May. The consensus is for a 0.3% increase in construction spending.

----- Tuesday, July 2nd -----
9:30 AM: Discussion, Fed Chair Jerome Powell, Policy Panel Discussion, At the European Central Bank (ECB) Forum on Central Banking 2024, Sintra, Portugal

10:00 AM ET: Job Openings and Labor Turnover Survey for May from the BLS.

This graph shows job openings (black line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

Jobs openings decreased in April to 8.06 million from 8.36 million in March.

The number of job openings (yellow) were down 19% year-over-year and quits were down 3% year-over-year.

Late in the day: Light vehicle sales for June.

The consensus is for light vehicle sales to be 15.9 million SAAR in June, unchanged from 15.9 million in May (Seasonally Adjusted Annual Rate).

This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the sales rate for last month.

Wards Auto is forecasting sales of 15.9 million SAAR in June.

----- Wednesday, July 3rd -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:15 AM: The ADP Employment Report for June. This report is for private payrolls only (no government). The consensus is for 170,000 payroll jobs added in June, up from 152,000 in May.

8:30 AM: The initial weekly unemployment claims report will be released.  The consensus is for 228 thousand initial claims, down from 233 thousand last week.

8:30 AM: Trade Balance report for May from the Census Bureau.

This graph shows the U.S. trade deficit, with and without petroleum, through the most recent report. The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

The consensus is the trade deficit to be $72.2 billion.  The U.S. trade deficit was at $74.6 billion the previous month.

10:00 AM: the ISM Services Index for June.   The consensus is for a reading of 52.5, down from 53.8.

2:00 PM: FOMC Minutes, Meeting of June 11-12, 2024

US markets will close at 1:00 PM ET prior to the Independence Day Holiday.

----- Thursday, July 4th -----
All US markets will be closed in observance of Independence Day

----- Friday, July 5th -----
8:30 AM: Employment Report for June.   The consensus is for 180,000 jobs added, and for the unemployment rate to be unchanged at 4.0%.

There were 272,000 jobs added in May, and the unemployment rate was at 4.0%.

This graph shows the jobs added per month since January 2021.