by Calculated Risk on 8/07/2024 07:00:00 AM

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

Mortgage applications increased 6.9 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Applications Survey for the week ending August 2, 2024.

The Market Composite Index, a measure of mortgage loan application volume, increased 6.9 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 6 percent compared with the previous week. The Refinance Index increased 16 percent from the previous week and was 59 percent higher than the same week one year ago. The seasonally adjusted Purchase Index increased 1 percent from one week earlier. The unadjusted Purchase Index increased 0.3 percent compared with the previous week and was 11 percent lower than the same week one year ago.

“Mortgage rates decreased across the board last week and mortgage application volume reached its highest level since January of this year. The 30-year fixed rate fell to 6.55 percent, reaching its lowest level since May 2023, following doveish communication from the Federal Reserve and a weak jobs report, which added to increased concerns of an economy slowing more rapidly than expected,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “As a result of lower rates, refinance applications increased across all loan types, particularly for VA loans, and were almost 60 percent higher than it was at this time last year and were at its highest level in two years.”

Added Kan, “Despite the downward movement in rates, purchase activity only saw small gains, with an increase in conventional purchase applications offset by decreases in government purchase applications. For-sale inventory is beginning to increase gradually in some parts of the country and homebuyers might be biding their time to enter the market given the prospect of lower rates.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased to 6.55 percent from 6.82 percent, with points decreasing to 0.58 from 0.62 (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 11% year-over-year unadjusted.  

Red is a four-week average (blue is weekly).  

Purchase application activity is up about 7% 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 increases recently.

by Calculated Risk on 8/06/2024 07:27:00 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.

by Calculated Risk on 8/06/2024 12:58:00 PM

Today, in the Calculated Risk Real Estate Newsletter: How Much will the Fannie & Freddie Conforming Loan Limit Change for 2025?

A brief excerpt:

With house prices up mid-single digits over the last year, an interesting question is: How much will the Fannie & Freddie conforming loan limits (CLL) change for 2025? And how much will the FHA insured loan limits change?

First, there are different loan limits for various geographical areas. There are also different loan limits depending on the number of units (from 1 to 4 units). For example, currently the CLL is $766,550 for one-unit properties in low-cost areas. For high-cost areas like Los Angeles County, the CLL is $1,149,825 for one-unit properties (50% higher than the baseline CLL).
...
This graph shows the CLL since 1979. The CLL was unchanged from 2006 though 2016.

We need the house price data through September 2024 to calculate the conforming loan limit for 2025. This quarterly data will be released in late November.​
...
Based on the current year-over-year house price change (through May), the CLL would be close to $810,000 in 2025. For high-cost areas like Los Angeles, the limit could increase to over $1.2 million. However, the year-over-year (YoY) increase in house prices has been slowing, and it is likely the increase will be less than 5.7%.

There is much more in the article.

by Calculated Risk on 8/06/2024 11:00:00 AM

From the NY Fed: Household Debt Increased Moderately in Q2 2024; Auto and Credit Card Delinquency Rates Remain Elevated

The Federal Reserve Bank of New York’s Center for Microeconomic Data today issued its Quarterly Report on Household Debt and Credit. The report shows total household debt increased by $109 billion (0.6%) in Q2 2024, to $17.80 trillion. The report is based on data from the New York Fed’s nationally representative Consumer Credit Panel. It includes a one-page summary of key takeaways and their supporting data points.

The New York Fed also issued an accompanying Liberty Street Economics blog post examining growing balances of home equity lines of credit (HELOC).

“The volume of mortgage originations remained low, primarily due to subdued refinancing activity.” said Andrew Haughwout, Director of Household and Public Policy Research at the New York Fed. “Homeowners continued to increase HELOC balances as an alternative way to extract home equity.”

Mortgage balances rose by $77 billion from the previous quarter and reached $12.52 trillion at the end of June. HELOC balances increased by $4 billion, representing the ninth consecutive quarterly increase since Q1 2022, and stood at $380 billion. This is a $63 billion increase from the series low reached in Q3 2021. Credit card balances increased by $27 billion to $1.14 trillion. Auto loan balances saw a $10 billion increase and stood at $1.63 trillion. Other balances, which include retail cards and other consumer loans, were effectively flat, with a $1 billion increase.

Mortgage originations continued increasing at about the same pace seen in the previous four quarters and stood at $374 billion. Aggregate limits on credit card accounts increased modestly by $69 billion, representing a 1.4% increase from the previous quarter. Limits on HELOC increased by $3 billion, the ninth consecutive quarterly increase.

Aggregate delinquency rates were unchanged from the previous quarter, with 3.2% of outstanding debt in some stage of delinquency. Delinquency transition rates for credit cards, auto loans, and mortgages increased slightly.
emphasis added

Click on graph for larger image.

Here are three graphs from the report:

The first graph shows household debt increased in Q2.  Household debt previously peaked in 2008 and bottomed in Q3 2013. Unlike following the great recession, there wasn't a decline in debt during the pandemic.

From the NY Fed:

Aggregate household debt balances increased by $109 billion in the second quarter of 2024, a 0.6% rise from 2024Q1. Balances now stand at $17.80 trillion and have increased by $3.7 trillion since the end of 2019, just before the pandemic recession.

The second graph shows the percent of debt in delinquency.

The overall delinquency rate was mostly unchanged in Q2.  From the NY Fed:

Aggregate delinquency rates were unchanged from the first quarter of 2024. As of June, 3.2% of outstanding debt was in some stage of delinquency. ... Delinquency transition rates for credit cards, auto loans, and mortgages increased slightly. Over the last year, approximately 9.1% of credit card balances and 8.0% of auto loan balances transitioned into delinquency. Early delinquency transition rates for mortgages increased by 0.1 percentage point yet remain low by historic standards.

The third graph shows Mortgage Originations by Credit Score.

From the NY Fed:

Credit quality of newly originated loans was steady, with 3.9% of mortgages and 16.7% of auto loans originated to borrowers with credit scores under 620, a slight increase from the first quarter. The median credit score for newly originated mortgages rose slightly to 772, while the median credit score of newly originated auto loans was 719, five points lower than the historic high reached in 2024Q1.

There is much more in the report.

by Calculated Risk on 8/06/2024 08:30:00 AM

The Census Bureau and the Bureau of Economic Analysis reported:

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced today that the goods and services deficit was $73.1 billion in June, down $1.9 billion from $75.0 billion in May, revised.

June exports were $265.9 billion, $3.9 billion more than May exports. June imports were $339.0 billion, $2.0 billion more than May imports.
emphasis added

Click on graph for larger image.

Both exports and imports increased in June.

Exports are up 5.9% year-over-year; imports are up 7.3% year-over-year.

Both imports and exports decreased sharply due to COVID-19 and then bounced back - imports and exports have generally increased recently.

The second graph shows the U.S. trade deficit, with and without petroleum.

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.

Note that net, exports of petroleum products are positive and have been increasing.

The trade deficit with China decreased to $22.8 billion from $24.1 billion a year ago.

by Calculated Risk on 8/06/2024 08:00:00 AM

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

From CoreLogic: CoreLogic: Annual US Home Price Growth Below 5% for Second Consecutive Month as June Home Prices Cool

• U.S. home prices posted a 4.7% year-over-year gain in June, with only one state posting double-digit gains.

• By summer 2025, prices are predicted to slow to 2.3% as home price growth continues to slow

• In June, home prices were up only 0.3% from the month before, half the rate of seasonal increase seen in June in the years prior to the pandemic
...
U.S. year-over-year home price gains inched down, reaching 4.7% in June, falling further from the previous month’s 4.9% in what will likely be a continual slide throughout the next year. Although June marked the 150th consecutive month of annual growth, the rate of growth is expected to decrease by more than half of its current rate, with prices expected to grow by only 2.3% on a year-over-year basis next summer.

Month over month, home prices rose just 0.3% from May to June. The CoreLogic HPI Forecast indicates that prices will repeat that pattern, rising by 0.3% again from June 2024 to July 2024. In the years prior to pandemic, monthly gains from May to July generally saw stronger increases. The cooling of monthly gains during the spring home-buying season reflects the impact of high mortgage rates on home buyers’ budgets and constraint on affordability.
...
“Housing market activity essentially froze at the end of the spring home-buying season as high mortgage rates continued to compress affordability and dissuade potential homebuyers,” said Dr. Selma Hepp, Chief Economist for CoreLogic. “The 0.3% gain in prices from the month before was less than half the increase seen between May and June prior to the pandemic, when the gains averaged 0.8%. In addition, cooling home prices continued to spread across more markets, and nine states reported a monthly decline, up from three states last month. The April surge in mortgage rates notably weighed on consumer sentiment, and consumers increasingly chose to respond to the anticipation of a lower mortgage rate environment later this year.”
emphasis added

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

by Calculated Risk on 8/05/2024 07:00:00 PM

From Matthew Graham at Mortgage News Daily: Lowest Mortgage Rates in More Than a Year

As of Friday, the average top tier 30yr fixed mortgage rate was merely at the lowest levels of 2024. A modest additional drop this morning brought that number to the lowest level since April 2023.
...
In the big picture, rates have been moving consistently lower due to an ongoing bond market rally that began in May. That rally is driven by softer inflation/economic data and an increased willingness on the part of the Fed to consider rate cuts. [30 year fixed 6.81%]
emphasis added

Tuesday:
• At 8:30 AM ET, Trade Balance report for June from the Census Bureau. The consensus is the trade deficit to be $72.6 billion.  The U.S. trade deficit was at $75.1 Billion the previous month.

• At 11:00 AM: NY Fed: Q2 Quarterly Report on Household Debt and Credit

by Calculated Risk on 8/05/2024 02:00:00 PM

From the Federal Reserve: The July 2024 Senior Loan Officer Opinion Survey on Bank Lending Practices

The July 2024 Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS) addressed changes in the standards and terms on, and demand for, bank loans to businesses and households over the past three months, which generally correspond to the second quarter of 2024.

Regarding loans to businesses, survey respondents reported, on balance, tighter standards and basically unchanged demand for commercial and industrial (C&I) loans to firms of all sizes over the second quarter. Meanwhile, banks reported tighter standards and weaker demand for all commercial real estate (CRE) loan categories.

For loans to households, banks reported, on balance, basically unchanged lending standards and weaker demand across all categories of residential real estate (RRE) loans. In addition, banks reported basically unchanged lending standards and unchanged demand for home equity lines of credit (HELOCs). Moreover, standards reportedly tightened for credit card and other consumer loans but remained basically unchanged for auto loans, while demand weakened for auto and other consumer loans but remained basically unchanged for credit card loans.

While banks, on balance, reported having tightened lending standards further for most loan categories in the second quarter, the net shares of banks that reported having tightened lending standards are lower than in the first quarter across almost all loan categories.
emphasis added

Click on graph for larger image.

This graph on Residential Real Estate demand is from the Senior Loan Officer Survey Charts.

This graph is for demand and shows that demand has declined.

The left graphs are from 1990 to 2014.  The right graphs are from 2015 to Q2 2024.

by Calculated Risk on 8/05/2024 11:02:00 AM

Today, in the Real Estate Newsletter: ICE Mortgage Monitor: Existing Home Inventory Surges in Florida and Texas

Brief excerpt:

The local data I track is indicating that Florida and Texas inventory is above normal, whereas inventory is still low in most of the country.

• Nearly every major market (98%) is seeing more for-sale inventory than at this time last year, with the largest rises in Tampa (+98%), Orlando (+82%), North Port (+80%) and Palm Bay, Fla. (+79%) and Denver (+78%)

• One in four major markets has at least 50% more inventory than last year, with one in five now at (or above) pre-pandemic inventory levels

• Lakeland, Fla., for example, had 58% more homes for sale in June than it did, on average, during the same month from 2017 to 2019, with Austin and San Antonio running second and third at 38% and 35% above pre-pandemic levels

by Calculated Risk on 8/05/2024 10:09:00 AM

This graph shows heavy truck sales since 1967 using data from the BEA. The dashed line is the July 2024 seasonally adjusted annual sales rate (SAAR) of 485 thousand.

Heavy truck sales really collapsed during the great recession, falling to a low of 180 thousand SAAR in May 2009.  Then heavy truck sales increased to a new record high of 570 thousand SAAR in April 2019.

Click on graph for larger image.

Note: "Heavy trucks - trucks more than 14,000 pounds gross vehicle weight."

Heavy truck sales declined sharply at the beginning of the pandemic, falling to a low of 308 thousand SAAR in May 2020.  

Heavy truck sales were at 485 thousand SAAR in July, up from 452 thousand in June, and down 3.8% from 504 thousand SAAR in July 2023.  

Usually, heavy truck sales decline sharply prior to a recession.   Heavy truck sales are solid.