by Calculated Risk on 7/09/2024 02:22:00 PM

From Manheim Consulting today: Wholesale Used-Vehicle Prices Declined in June

Wholesale used-vehicle prices (on a mix, mileage, and seasonally adjusted basis) were down in June compared to May. The Manheim Used Vehicle Value Index (MUVVI) fell to 196.1, a decline of 8.9% from a year ago. The seasonal adjustment to the index mitigated the impact on the month, resulting in values that declined 0.6% month over month for the second time in a row. The non-adjusted price in June decreased by 2.2% compared to May, moving the unadjusted average price down 10.0% year over year.
emphasis added

Click on graph for larger image.

This index from Manheim Consulting is based on all completed sales transactions at Manheim’s U.S. auctions.

The Manheim index suggests used car prices declined in June (seasonally adjusted) and were down 8.9% year-over-year (YoY).

by Calculated Risk on 7/09/2024 11:19:00 AM

Today, in the Calculated Risk Real Estate Newsletter: 1st Look at Local Housing Markets in June

A brief excerpt:

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

This is the first look at several early reporting local markets in June. 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 June were mostly for contracts signed in April and May when 30-year mortgage rates averaged 6.99% and 7.06%, respectively (Freddie Mac PMMS). May was the first month since last Fall with average 30-year mortgage rates over 7%
...
In June, sales in these markets were down 6.7% YoY. Last month, in May, these same markets were up 3.1% year-over-year Not Seasonally Adjusted (NSA).

Sales in all of these markets are down significantly compared to June 2019.
...
This is a year-over-year decrease NSA for these early reporting markets. However, 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.
...
This was just a several early reporting markets. Many more local markets to come!

There is much more in the article.

by Calculated Risk on 7/09/2024 10:03:00 AM

This testimony will be live here at 10:00 AM ET.

Report here.

From Fed Chair Powell: Testimony: Semiannual Monetary Policy Report to the Congress. An excerpt:

The Federal Reserve remains squarely focused on our dual mandate to promote maximum employment and stable prices for the benefit of the American people. Over the past two years, the economy has made considerable progress toward the Federal Reserve's 2 percent inflation goal, and labor market conditions have cooled while remaining strong. Reflecting these developments, the risks to achieving our employment and inflation goals are coming into better balance.

The Committee has stated that we do not expect it will be appropriate to reduce the target range for the federal funds rate until we have gained greater confidence that inflation is moving sustainably toward 2 percent. Incoming data for the first quarter of this year did not support such greater confidence. The most recent inflation readings, however, have shown some modest further progress, and more good data would strengthen our confidence that inflation is moving sustainably toward 2 percent. emphasis added

by Calculated Risk on 7/09/2024 08:09:00 AM

I'm not sure about "renowned" but this interview hits several of the key points I've been discussing about housing.

From Lance Lambert at ResiClub: Renowned housing analyst who predicted the 2008 home price crash weighs in on the current market Here is the intro:

Years before the housing bubble burst in 2008, housing analyst Bill McBride began chronicling the troubles in the U.S. housing market in his blog Calculated Risk.

Not only did he predict the crash, but he also called the 2012 housing price bottom. Fast-forward to 2024, and this cycle he hasn’t been as concerned as he was in 2007.

McBride has maintained for the past few years that this housing cycle will ultimately resemble something closer to the 1978 to 1982 period—a time of overheated house price growth that saw spiked interest rates, strained affordability, crashed existing home sales volume, and yet no national home price crash—rather than the 2007-2011 national housing price crash years.

To better understand Bill McBride's perspective on the current housing and economic cycle, ResiClub reached out and conducted a Q&A with him.

Enjoy!

by Calculated Risk on 7/08/2024 07:26:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Gently Lower to Begin New Week

CPI has been the most important input for rates as far as economic reports are concerned. Thursday's is an exciting installment as it has a chance to confirm a promising shift seen in last month's data. If confirmed, rates should move easily into the 6's. [30 year fixed 7.01%]
emphasis added

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

• At 10:00 AM, Testimony, Fed Chair Jerome Powell, Semiannual Monetary Policy Report to Congress, Before the U.S. Senate Committee on Banking, Housing, and Urban Affairs

by Calculated Risk on 7/08/2024 12:16:00 PM

Today, in the Calculated Risk Real Estate Newsletter: Fannie and Freddie: Single Family Serious Delinquency Rate Decreased in May, Multi-family Increased Slightly

Brief excerpt:

Single-family serious delinquencies decreased in May, and multi-family serious delinquencies increased slightly.
...
Freddie Mac reports that the multi-family delinquencies rate increased to 0.36% in May, up from 0.35% in April, but down from the recent peak of 0.44% in January.

This graph shows the Freddie multi-family serious delinquency rate since 2012. Rates were still high in 2012 following the housing bust and financial crisis.

The multi-family rate increased following the pandemic and has increased recently as rent growth has slowed, vacancy rates have increased, and borrowing rates have increased sharply. The rate surged higher in January but declined in February and March. This will be something to watch as more apartments come on the market.

There is much more in the article.

by Calculated Risk on 7/08/2024 10:12:00 AM

Here is another monthly update on lumber prices.

SPECIAL NOTE: The CME group discontinued the Random Length Lumber Futures contract on May 16, 2023.  I switched to a physically-delivered Lumber Futures contract that was started in August 2022. 

Unfortunately, this impacts long term price comparisons since the new contract was priced about 24% higher than the old random length contract for the period when both contracts were available.

This graph shows CME random length framing futures through last August (blue), and the new physically-delivered Lumber Futures (LBR) contract starting in August 2022 (Red).

LBR is currently at $446.00 per 1000 board feet, down 20% from a year ago.

Click on graph for larger image.

There is somewhat of a seasonal demand for lumber, and lumber prices frequently peak in the first half of the year.

We didn't see a significant runup in the Spring period of 2023 or 2024 due to the housing slowdown.  LBR is now at the lowest level since the futures contract was started.

by Calculated Risk on 7/08/2024 08:13:00 AM

Altos reports that active single-family inventory was up 1.1% week-over-week. Inventory is now up 32.1% 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 July 5th, inventory was at 653 thousand (7-day average), compared to 646 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 75% from the record low for the same week in 2021, but still well below normal levels.

Inventory was up 40.0% compared to the same week in 2023 (last week it was up 38.4%), and down 31.2% compared to the same week in 2019 (last week it was down 33.2%). 

Inventory should be above 2020 levels for the same week next week.

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 7/07/2024 06:46:00 PM

Weekend:
• Schedule for Week of July 7, 2024

Monday:
• No major economic releases scheduled.

From CNBC: Pre-Market Data and Bloomberg futures S&P 500 are down 9 and DOW futures are down 59 (fair value).

Oil prices were higher over the last week with WTI futures at $83.16 per barrel and Brent at $86.54 per barrel. A year ago, WTI was at $74, and Brent was at $79 - so WTI oil prices are up about 12% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $3.47 per gallon. A year ago, prices were at $3.51 per gallon, so gasoline prices are down $0.04 year-over-year.

by Calculated Risk on 7/07/2024 08:21:00 AM

Note: I covered apartments and offices in the newsletter: Moody's: Apartment Vacancy Rate Unchanged in Q2; Office Vacancy Rate at New Record High

From Moody’s Analytics economists: Apartment Demand Slowly Catching Up, Office Stress Continued to Manifest, Retail Resilient Despite Bankruptcies, And Industrial Cools Down

The Q2 2024 data maintained its familiar trend with the retail vacancy rate holding steady at 10.4%. Both asking and effective rents experienced a marginal increase of 0.2% to $21.79 and $19.07 per square foot respectively. The second quarter consumer spending fell short of expectations: after a 0.2% decline in April, retail sales in May were only up by 0.1%, not meeting the anticipated 0.3% increase. As low-income consumers continued to feel the pinch, those in the middle are now encountering financial challenges while high earners pulled back on luxury item purchases. However, spending has not ground to a halt: consumers plan to travel and attend concerts this summer, indicating a shift in preference towards experiences over goods.

The current trends signal an expectation of relatively subdued construction activity for the rest of the year. In the absence of significant new developments, current shopping and neighborhood centers have taken advantage of companies applying the smaller-yet-smarter model to fill their vacant anchors. This approach involves large retail chains offering a limited selection of their products in more compact locations. The business rationale is to address the decline in revenues by reducing operational costs through lower rental expenses, fewer staff members, and a reduced inventory, culminating in decreased overall overhead and, consequently, higher profit margins. This strategy is helping retail landlords fill vacancies caused by recent bankruptcies and attributing to the stabilized vacancy rate.

This graph shows the strip mall vacancy rate starting in 1980 (prior to 2000 the data is annual). 

Back in the '80s, there was overbuilding in the mall sector even as the vacancy rate was rising. This was due to the very loose commercial lending that led to the S&L crisis.

In the mid-'00s, mall investment picked up as mall builders followed the "roof tops" of the residential boom (more loose lending). This led to the vacancy rate moving higher even before the recession started. Then there was a sharp increase in the vacancy rate during the recession and financial crisis.

Recently the vacancy rate has held steady at a high level as online shopping continues to impact brick and mortar stores.