by Calculated Risk on 7/17/2024 07:00:00 AM

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

Mortgage applications increased 3.9 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Applications Survey for the week ending July 12, 2024.

The Market Composite Index, a measure of mortgage loan application volume, increased 3.9 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 30 percent compared with the previous week. The Refinance Index increased 15 percent from the previous week and was 37 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 22 percent compared with the previous week and was 14 percent lower than the same week one year ago.

“Mortgage rates declined last week, as recent signs of cooling inflation and the increased likelihood of Fed rate cuts later this year pulled them lower. The 30-year fixed rate declined to 6.87 percent, the lowest rate since March 2024,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Application activity was up 4 percent, driven by a 15 percent jump in refinances to the highest level since August 2022. While FHA and VA refinance applications accounted for a significant share of the increase, these are likely recently originated loans with even higher than current offered rates. Even with last week’s rate decline, purchase applications continue to lag, down 14 percent compared to last year’s pace.”
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The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased to 6.87 percent from 7.00 percent, with points decreasing to 0.57 from 0.60 (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 14% 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 some increase recently.

by Calculated Risk on 7/16/2024 07:07:00 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 8:30 AM, Housing Starts for June. The consensus is for 1.310 million SAAR, up from 1.277 million SAAR in May.

• At 9:15 AM, The Fed will release Industrial Production and Capacity Utilization for June. The consensus is for a 0.3% increase in Industrial Production, and for Capacity Utilization to increase to 78.6%.

• At 2:00 PM, the Federal Reserve Beige Book, an informal review by the Federal Reserve Banks of current economic conditions in their Districts.

by Calculated Risk on 7/16/2024 12:34:00 PM

Today, in the Calculated Risk Real Estate Newsletter: 3rd 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 third look at several 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 12.5% YoY. Last month, in May, these same markets were down 1.0% year-over-year Not Seasonally Adjusted (NSA).
...
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.
...
More local markets to come!

There is much more in the article.

by Calculated Risk on 7/16/2024 10:00:00 AM

The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 42, down from 43 last month. Any number below 50 indicates that more builders view sales conditions as poor than good.

From the NAHB: High Mortgage Rates Continue to Hold Back Builder Confidence

Mortgage rates that averaged 6.92% in June per Freddie Mac, along with elevated rates for construction and development loans, continue to put a damper on builder sentiment.

Builder confidence in the market for newly built single-family homes was 42 in July, down one point from June, 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.

“While buyers appear to be waiting for lower interest rates, the six-month sales expectation for builders moved higher, indicating that builders expect mortgage rates to edge lower later this year as inflation data are showing signs of easing,” said NAHB Chairman Carl Harris, a custom home builder from Wichita, Kan.

“Though inflation is still above the Federal Reserve’s target of 2%, it appears to be back on a cooling trend. NAHB is forecasting Fed rate reductions to begin at the end of this year, and this action will lower interest rates for home buyers, builders and developers,” said NAHB Chief Economist Robert Dietz. “And while home inventory is increasing, total market inventory remains lean at a 4.4 months’ supply, indicating a long-run need for more home construction.”

The July HMI survey also revealed that 31% of builders cut home prices to bolster sales in July, above the June rate of 29%. However, the average price reduction in July held steady at 6% for the 13th straight month. Meanwhile, the use of sales incentives held steady at 61% in July, the same reading as June.
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The HMI index charting current sales conditions in July fell one point to 47 and the gauge charting traffic of prospective buyers also declined by a single-point to 27. The component measuring sales expectations in the next six months increased one point to 48.

Looking at the three-month moving averages for regional HMI scores, the Northeast fell six points to 56, the Midwest dropped four points to 43, the South decreased two points to 44 and the West posted a four-point decline to 37.
emphasis added

Click on graph for larger image.

This graph shows the NAHB index since Jan 1985.

This was slightly below the consensus forecast.

by Calculated Risk on 7/16/2024 08:30:00 AM

On a monthly basis, retail sales were "virtually unchanged" from May to June (seasonally adjusted), and sales were up 2.3 percent from June 2023.

From the Census Bureau report:

Advance estimates of U.S. retail and food services sales for June 2024, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $704.3 billion, virtually unchanged from the previous month, but up 2.3 percent above June 2023. ... The April 2024 to May 2024 percent change was revised from up 0.1 percent to up 0.3 percent.
emphasis added

Click on graph for larger image.

This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline).

Retail sales ex-gasoline were up 0.2% in June.

The second graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993.

Retail and Food service sales, ex-gasoline, increased by 2.7% on a YoY basis.

The change in sales in June was at expectations, and sales in April and May were revised up.

by Calculated Risk on 7/15/2024 07:13:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates' Impressive Winning Streak Faces Increasing Resistance

We occasionally reference 5 day winning streaks for mortgage rates as the sort of uncommon occurrence that greatly increases the odds of at least a temporary pullback. Longer streaks do happen, but odds of a pullback increase sharply after 8 days.

With all that in mind, today marked the 8th straight day of improvement in mortgage rates.[30 year fixed 6.81%]
emphasis added

Tuesday:
• At 8:30 AM ET, Retail sales for June is scheduled to be released.  The consensus is for no change in retail sales.

• At 10:00 AM, The July NAHB homebuilder survey. The consensus is for a reading of 44, up from 43. Any number below 50 indicates that more builders view sales conditions as poor than good.

by Calculated Risk on 7/15/2024 11:21:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Part 2: Current State of the Housing Market; Overview for mid-July 2024

A brief excerpt:

Last week, in Part 1: Current State of the Housing Market; Overview for mid-July 2024 I reviewed home inventory, housing starts and sales.

In Part 2, I will look at house prices, mortgage rates, rents and more.
...
Other measures of house prices suggest prices will be up slightly less YoY in the May Case-Shiller index. The NAR reported median prices were up 5.8% YoY in May, up from 5.4% YoY in April. The month-to-month decline in existing home sales in May was due to the South region where prices are the lowest, and this regional decline in sales probably boosted the median price slightly.

ICE reported prices were up 4.6% YoY in May, down from 5.3% YoY in April, and Freddie Mac reported house prices were up 5.9% YoY in May, down from 6.4% YoY in April.

Here is a comparison of year-over-year change in the FMHPI, median house prices from the NAR, and the Case-Shiller National index.

The FMHPI and the NAR median prices appear to be leading indicators for Case-Shiller. Based on recent monthly data, and the FMHPI, the YoY change in the Case-Shiller index will likely be lower YoY in May compared to April.

There is much more in the article.

by Calculated Risk on 7/15/2024 08:14:00 AM

Inventory growth paused this week, likely due to the July 4th holiday weekend.  

Altos reports that active single-family inventory was down 0.2% week-over-week. Inventory is now up 31.9% from the February seasonal bottom.

Click on graph for larger image.

This inventory graph is courtesy of Altos Research.

As of July 12th, inventory was at 651 thousand (7-day average), compared to 653 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 38.1% compared to the same week in 2023 (last week it was up 40.0%), and down 31.5% compared to the same week in 2019 (last week it was down 31.2%). 

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 7/14/2024 07:19:00 PM

Weekend:
• Schedule for Week of July 14, 2024

Monday:
• At 8:30 AM ET, The New York Fed Empire State manufacturing survey for July. The consensus is for a reading of -6.0, unchanged from -6.0.

• At 12:30 PM, Discussion, Fed Chair Jerome Powell, Conversation with David M. Rubenstein, Chairman of the Economic Club of Washington, D.C.

From CNBC: Pre-Market Data and Bloomberg futures S&P 500 are up 1 and DOW futures are up 43 (fair value).

Oil prices were higher over the last week with WTI futures at $82.21 per barrel and Brent at $85.03 per barrel. A year ago, WTI was at $75, and Brent was at $80 - so WTI oil prices are up about 10% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $3.50 per gallon. A year ago, prices were at $3.54 per gallon, so gasoline prices are down $0.04 year-over-year.

by Calculated Risk on 7/14/2024 08:15:00 AM

From STR: U.S. hotel results for week ending 6 July

Due to the Fourth of July, 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 6 July. ...

30 June through 6 July 2024 (percentage change from comparable week in 2023):

• Occupancy: 61.3% (-0.9%)
• Average daily rate (ADR): US$157.27 (+0.5%)
• Revenue per available room (RevPAR): US$96.35 (-0.4%)
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.