by Calculated Risk on 7/03/2024 07:00:00 AM

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

Mortgage applications decreased 2.6 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Applications Survey for the week ending June 28, 2024.

The Market Composite Index, a measure of mortgage loan application volume, decreased 2.6 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 decreased 2 percent from the previous week and was 29 percent higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 3 percent from one week earlier. The unadjusted Purchase Index increased 7 percent compared with the previous week and was 12 percent lower than the same week one year ago.

“Mortgage rates moved higher last week, crossing the 7 percent mark, even as the latest inflation data has kept market expectations alive for a rate cut from the Fed later this year,” said Mike Fratantoni, MBA’s SVP and Chief Economist. “Purchase applications decreased the final full week of June, even as both new and existing inventories have increased over the past few months. Refinance activity also remains subdued – although there was a slight increase in applications for conventional refinance loans.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) increased to 7.03 percent from 6.93 percent, with points increasing to 0.62 from 0.61 (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, but still 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 7/02/2024 07:53:00 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.

• At 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.

• At 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.

• Also at 8:30 AM, Trade Balance report for May from the Census Bureau. The consensus is the trade deficit to be $72.2 billion.  The U.S. trade deficit was at $74.6 billion the previous month.

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

• At 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.

by Calculated Risk on 7/02/2024 05:11:00 PM

Wards Auto released their estimate of light vehicle sales for May: Cyberattack Puts Dent in June U.S. Light-Vehicle Sales (pay site).

An initial estimate indicates the cyberattack cost the industry 50,000 unit-sales in June and knocked 600,000 off the month’s seasonally adjusted annual rate, which totaled 15.3 million. The disruptions caused quarterly sales to decline year-over-year for the first time since Q3-2022, as deliveries totaled 4.075 million units, down 0.4% from April-June 2023. The Q2 SAAR of 15.7 million was flat with the year-ago total but higher than Q1’s 15.3 million.

Click on graph for larger image.

This graph shows light vehicle sales since 2006 from the BEA (blue) and Wards Auto's estimate for June (red).

Sales in June (15.29 million SAAR) were down 3.8% from May, and down 4.8% from June 2023.

The second graph shows light vehicle sales since the BEA started keeping data in 1967.

Sales in June were below the consensus forecast.

There should be some bounce back from the cyberattack in July.

by Calculated Risk on 7/02/2024 12:45:00 PM

Today, in the Real Estate Newsletter: Asking Rents Mostly Unchanged Year-over-year

Brief excerpt:

Tracking rents is important for understanding the dynamics of the housing market. For example, the sharp increase in rents helped me deduce that there was a surge in household formation in 2021 (See from September 2021: Household Formation Drives Housing Demand). Now that household formation has slowed, and multi-family completions have increased, rents are under pressure.

From ApartmentList.com: Apartment List National Rent Report

Welcome to the July 2024 Apartment List National Rent Report. Rent prices ticked up for the fifth straight month, but rent growth over the course of 2024 as a whole remains modest, signaling ongoing sluggishness in the market. The national median rent increased by 0.4% in June and now stands at $1,411, but the pace of growth slowed slightly this month. This is typically the time of year when rent growth is accelerating amid the busy moving season, so sluggish growth this month indicates that the market is headed for another slow summer.

Since the second half of 2022, seasonal declines in rent prices have been steeper than usual and seasonal increases have been more mild. As a result, apartments are on average slightly cheaper today than they were one year ago. Year-over-year rent growth nationally currently stands at -0.7 percent and has now been in negative territory since last summer. But despite this cooldown, the national median rent is still more than $200 per month higher than it was just a few years ago.

Realtor.com: Tenth Consecutive Month with Year-over-year Decline in Rents

In May 2024, the U.S. median rent continued to decline year over year for the 10th month in a row, down 0.7% for 0-2 bedroom properties across the top 50 metros, on par with the rate seen in April 2024.

There is much more in the article.

by Calculated Risk on 7/02/2024 10:00:00 AM

From the BLS: Job Openings and Labor Turnover Summary

The number of job openings changed little at 8.1 million on the last business day of May, the U.S. Bureau of Labor Statistics reported today. Over the month, both the number of hires and total separations were little changed at 5.8 million and 5.4 million, respectively. Within separations, quits (3.5 million) and layoffs and discharges (1.7 million) changed little.
emphasis added

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

This series started in December 2000.

Note: The difference between JOLTS hires and separations is similar to the CES (payroll survey) net jobs headline numbers. This report is for May; the employment report this Friday will be for June.

Click on graph for larger image.

Note that hires (dark blue) and total separations (red and light blue columns stacked) are usually pretty close each month. This is a measure of labor market turnover.  When the blue line is above the two stacked columns, the economy is adding net jobs - when it is below the columns, the economy is losing jobs.

The spike in layoffs and discharges in March 2020 is labeled, but off the chart to better show the usual data.

Jobs openings increased in May to 8.14 million from 7.92 million in April.

The number of job openings (black) were down 13% year-over-year. 

Quits were down 14% year-over-year. These are voluntary separations. (See light blue columns at bottom of graph for trend for "quits").

by Calculated Risk on 7/02/2024 09:31:00 AM

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

From CoreLogic: CoreLogic: Annual US Home Price Growth Dips Below 5% in May as Prices Cool Across More Markets

• U.S. single-family home prices (including distressed sales) increased by 4.9% year over year in May 2024 compared with May 2023. On a month-over-month basis, home prices increased by 0.6% compared with April 2024.
...
U.S. year-over-year home price gains inched down to 4.9% in May, though it was still the 148th consecutive month of annual growth. As has been the case for the past year, the Northeast continued to lead the country for annual appreciation, with New Hampshire the only state to post a double-digit increase. Meanwhile, the price growth gap between detached homes and attached homes further widened, likely indicating homebuyer preferences for more personal space to work from home after the height of the pandemic, as well as surging HOA fees due to maintenance costs.

“While national annual home price growth continues to slow as anticipated, cooling appreciation over the past months is now observed in more markets, as the surge in mortgage rates this spring caused both slowing homebuyer demand and prices,” said Dr. Selma Hepp, chief economist for CoreLogic. “However, persistently stronger home price gains this spring continue in markets where inventory is well below pre-pandemic levels, such as those in the Northeast.”

“Also, markets that are relatively more affordable, such as those in the Midwest, have seen healthy price growth this spring,” Hepp continued. “On the other hand, markets with notable inventory increases, including those in Florida and Texas, continue to see annual deceleration that is pulling prices below numbers recorded last year.”
emphasis added

This was a smaller YoY increase than reported for April, and down from the 5.8% YoY increase reported at the beginning of 2024.

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.