by Calculated Risk on 7/29/2024 09:58:00 AM

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

A brief excerpt:

In June, sales in these markets were down 13.1% YoY. Last month, in May, these same markets were down 0.1% year-over-year Not Seasonally Adjusted (NSA).
...
This was a year-over-year decrease NSA for these markets. However, there were two fewer working days in June 2024 compared to June 2023 (19 vs 21), so seasonally adjusted sales were much higher than the NSA data suggests. Note that the NAR reported sales NSA were down 13.4% YoY in June, almost the same as this local data!

July sales will be mostly for contracts signed in May and June, and mortgage rates decreased slightly to an average of 6.92% in June, down from 7.06% in May. My early expectation is we will see existing home sales at or above the same level in July as compared to June, on a seasonally adjusted annual rate basis (SAAR).

Note for next month (July sales): There were two more working days in July 2024 compared to July 2023 (22 vs 20), so seasonally adjusted sales will be much lower than the NSA data suggests.

There is much more in the article.

by Calculated Risk on 7/29/2024 08:11:00 AM

Altos reports that active single-family inventory was up 1.3% week-over-week. Inventory is now up 37.1% from the February seasonal bottom.

Click on graph for larger image.

This inventory graph is courtesy of Altos Research.

As of July 26th, inventory was at 677 thousand (7-day average), compared to 668 thousand the prior week.   

This is the highest level of inventory since June 2020; however, 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.  

Inventory was up 39.4% compared to the same week in 2023 (last week it was up 39.1%), and down 29.4% compared to the same week in 2019 (last week it was down 30.3%). 

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 7/28/2024 06:16:00 PM

Weekend:
• Schedule for Week of July 28, 2024

• FOMC Preview: No Change to Fed Funds Rate

Monday:
• At 10:30 AM ET, Dallas Fed Survey of Manufacturing Activity for July.

From CNBC: Pre-Market Data and Bloomberg futures S&P 500 are up 5 and DOW futures are up 52 (fair value).

Oil prices were lower over the last week with WTI futures at $77.16 per barrel and Brent at $81.13 per barrel. A year ago, WTI was at $81, and Brent was at $84 - so WTI oil prices are down about 5% 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 $3.71 per gallon, so gasoline prices are down $0.23 year-over-year.

by Calculated Risk on 7/28/2024 08:11:00 AM

Most analysts expect there will be no change to the federal funds rate at the meeting this week keeping the target range at 5‑1/4 to 5-1/2 percent.   It is likely the FOMC will hint at a possible September rate cut.  

Currently market participants expect the next Fed move to be a 25 bp cut announced at the September FOMC meeting.  Market participants are also pricing in a 2nd rate cut at the November meeting, and a 3rd rate cut in December.

From Goldman Sachs:

Encouraging inflation news and a further rise in the unemployment rate have pushed Fed officials closer to cutting. The FOMC is set to hold steady next week but is likely to revise its statement to hint that a cut at the following meeting in September has become more likely.

Specifically, we expect the FOMC to revise its statement to say that the unemployment rate has “risen slightly but remains low,” that there has been “further progress” (dropping “modest”) toward the 2% inflation goal, that the risks to the two sides of the mandate “are in” (not “have moved toward”) better balance, and—most importantly—that it now needs only “somewhat” greater confidence in the inflation outlook in order to start lowering interest rates.
emphasis added

From BofA:

The June personal income and outlays report was another tick of the box. Inflation is back on track towards the 2% target even if base effects will lift the y/y rate in 2H. Therefore, the likelihood a rate cuts continues to increase. That said, solid spending and strong GDP growth means the Fed can be patient and await more data. We remain comfortable with our forecast that cuts will start in December, but upcoming inflation and employment data could tip the scale to an earlier cut. Focus now shifts to July data.

Projections will NOT be released at this meeting. For review, here are the June projections. 

Since the last projections were released, economic growth has been close to expectations, the unemployment rate is slightly higher, and inflation lower than expected (although there are some "base effects" that might push PCE inflation up a little later this year).  

The BEA's advance estimate for Q2 GDP showed real growth at 2.8% annualized, following 1.4% annualized real growth in Q1. That puts real growth in the first half at 2.1%; at the midpoint of the June FOMC projections.  

GDP projections of Federal Reserve Governors and Reserve Bank presidents, Change in Real GDP1
Projection Date	2024	2025	2026
June 2024	1.9 to 2.3	1.8 to 2.2	1.8 to 2.1
Mar 2024	2.0 to 2.4	1.9 to 2.3	1.8 to 2.1

¹ Projections of change in real GDP and inflation are from the fourth quarter of the previous year to the fourth quarter of the year indicated.

The unemployment rate was at 4.1% in June.  This is close to the high end of the June projections.

Unemployment projections of Federal Reserve Governors and Reserve Bank presidents, Unemployment Rate2
Projection Date	2024	2025	2026
June 2024	3.9 to 4.2	3.9 to 4.3	3.9 to 4.3
Mar 2024	3.9 to 4.1	3.9 to 4.2	3.9 to 4.3

² Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated.

As of June 2024, PCE inflation increased 2.5 percent year-over-year (YoY). This is at the low end of the June projections.

Inflation projections of Federal Reserve Governors and Reserve Bank presidents, PCE Inflation1
Projection Date	2024	2025	2026
June 2024	2.5 to 2.9	2.2 to 2.4	2.0 to 2.1
Mar 2024	2.3 to 2.7	2.1 to 2.2	2.0 to 2.1

PCE core inflation increased 2.6 percent YoY in June. This is lower than the June FOMC projections for Q4.

Core Inflation projections of Federal Reserve Governors and Reserve Bank presidents, Core Inflation1
Projection Date	2024	2025	2026
June 2024	2.8 to 3.0	2.3 to 2.4	2.0 to 2.1
Mar 2024	2.5 to 2.8	2.1 to 2.3	2.0 to 2.1

by Calculated Risk on 7/27/2024 02:11:00 PM

At the Calculated Risk Real Estate Newsletter this week:

Click on graph for larger image.

• NAR: Existing-Home Sales Decreased to 3.89 million SAAR in June

• New Home Sales Decrease to 617,000 Annual Rate in June

• Watch Months-of-Supply!

• NMHC: "Apartment Market Conditions Continue to Loosen"

• "Snow Belt to Sun Belt Migration: End of an Era?"

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

by Calculated Risk on 7/27/2024 08:11:00 AM

The key report this week is the July employment report.

Other key reports include Case-Shiller house prices for May, ISM manufacturing index and July vehicle sales.

The FOMC meets this week and no change to the Fed Funds rate is expected.

----- Monday, July 29th -----
10:30 AM: Dallas Fed Survey of Manufacturing Activity for July.

----- Tuesday, July 30th -----
9:00 AM: S&P/Case-Shiller House Price Index for May.

This graph shows the year-over-year change in the seasonally adjusted National Index, Composite 10 and Composite 20 indexes through the most recent report (the Composite 20 was started in January 2000).

The consensus is for a 6.0% year-over-year increase in the Comp 20 index for May.

9:00 AM: FHFA House Price Index for May. This was originally a GSE only repeat sales, however there is also an expanded index.

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

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

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

The number of job openings (yellow) were down 13% year-over-year and Quits were down 14% year-over-year.

10:00 AM: the Q2 2024 Housing Vacancies and Homeownership from the Census Bureau.

----- Wednesday, July 31st -----
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 168,000 payroll jobs added in June, up from 150,000 in May.

9:45 AM: Chicago Purchasing Managers Index for July.

10:00 AM: Pending Home Sales Index for June. The consensus is for a 1.5% increase in the index.

2:00 PM: FOMC Meeting Announcement. No change to the Fed Funds rate is expected.

2:30 PM: Fed Chair Jerome Powell holds a press briefing following the FOMC announcement.

----- Thursday, August 1st -----
8:30 AM: The initial weekly unemployment claims report will be released.  The consensus is for 230 thousand initial claims, down from 235 thousand last week.

10:00 AM: ISM Manufacturing Index for July. The consensus is for the ISM to be at 49.0, up from 48.5 in June. 

10:00 AM: Construction Spending for June. The consensus is for a 0.2% increase in construction spending.

Late: Light vehicle sales for July from the BEA. The consensus is for light vehicle sales to be 16.2 million SAAR in July, up from 15.3 million in June (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.


----- Friday, August 2nd -----
8:30 AM: Employment Report for July.   The consensus is for 175,000 jobs added, and for the unemployment rate to be unchanged at 4.1%.

There were 206,000 jobs added in June, and the unemployment rate was at 4.1%.

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

by Calculated Risk on 7/26/2024 07:01:00 PM

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

For deaths, I'm currently using 4 weeks ago for "now", since the most recent three weeks will be revised significantly.

Note: "Effective May 1, 2024, hospitals are no longer required to report COVID-19 hospital admissions, hospital capacity, or hospital occupancy data."  So I'm no longer tracking hospitalizations.

COVID Metrics
	Now	Week Ago	Goal
Deaths per Week	368	399	≤3501
1my goals to stop weekly posts, 🚩 Increasing number weekly for Deaths ✅ Goal met.

Click on graph for larger image.

This graph shows the weekly (columns) number of deaths reported.

Although weekly deaths met the original goal to stop posting, I'm going to continue to post now that deaths are above the goal again.  

And here is a graph I'm following concerning COVID in wastewater as of July 26th:

This appears to be a leading indicator for COVID hospitalizations and deaths.

COVID in wastewater was increasing - especially in the West and South - but it might have peaked (except in the South). 

by Calculated Risk on 7/26/2024 03:15:00 PM

Here is new working paper from Sylvain Leduc and Daniel J. Wilson at the Federal Reserve Bank of San Francisco Snow Belt to Sun Belt Migration: End of an Era

Given climate change projections for coming decades of increasing extreme heat in the hottest U.S. counties and decreasing extreme cold in the coldest counties, our findings suggest the “pivoting” in the U.S. climate-migration correlation over the past 50 years is likely to continue, leading to a reversal of the 20th century Snow Belt to Sun Belt migration pattern.

If this sounds familiar, I wrote about this last year: The Long-Term Housing and Population Shift

The impact of climate change will be important for housing.

by Calculated Risk on 7/26/2024 08:53:00 AM

Here is a graph of the year-over-year change in shelter from the CPI report and housing from the PCE report this morning, both through June 2024.

CPI Shelter was up 5.1% year-over-year in June, down from 5.4% in May, and down from the cycle peak of 8.2% in March 2023.

Housing (PCE) was up 5.3% YoY in June, down from 5.5% in May, and down from the cycle peak of 8.3% in April 2023.

Since asking rents are mostly flat year-over-year, these measures will slowly continue to decline over the next year.

The second graph shows PCE prices, Core PCE prices and Core ex-housing over the last 3 months (annualized):

Key measures are slightly above the Fed's target on a 3-month basis. Note: There appears to be some residual seasonality distorting PCE prices in Q1, especially in January.

3-month annualized change:

PCE Price Index: 1.5%
Core PCE Prices: 2.3%
Core minus Housing: 1.8%

by Calculated Risk on 7/26/2024 08:30:00 AM

The BEA released the Personal Income and Outlays report for June:

Personal income increased $50.4 billion (0.2 percent at a monthly rate) in June, according to estimates released today by the U.S. Bureau of Economic Analysis. Disposable personal income (DPI), personal income less personal current taxes, increased $37.7 billion (0.2 percent) and personal consumption expenditures (PCE) increased $57.6 billion (0.3 percent).

The PCE price index increased 0.1 percent. Excluding food and energy, the PCE price index increased 0.2 percent. Real DPI increased 0.1 percent in June and real PCE increased 0.2 percent; goods increased 0.2 percent and services increased 0.2 percent .
emphasis added

The June PCE price index increased 2.5 percent year-over-year (YoY), down from 2.6 percent YoY in May, and down from the recent peak of 7.0 percent in June 2022.

The PCE price index, excluding food and energy, increased 2.6 percent YoY, unchanged from 2.6 percent in May, and down from the recent peak of 5.4 percent in February 2022.

The following graph shows real Personal Consumption Expenditures (PCE) through June 2024 (2017 dollars). Note that the y-axis doesn't start at zero to better show the change.

Click on graph for larger image.

The dashed red lines are the quarterly levels for real PCE.

Personal income was slightly below expectations, and PCE was slightly above expectations.

Inflation was slightly below expectations.