by Calculated Risk on 8/14/2024 08:49:00 AM

Here are a few measures of inflation:

The first graph is the one Fed Chair Powell had mentioned when services less rent of shelter was up around 8% year-over-year.  This declined and is now up 4.6% YoY.

Click on graph for larger image.

This graph shows the YoY price change for Services and Services less rent of shelter through July 2024.

Services were up 4.9% YoY as of July 2024, down from 5.0% YoY in June.

Services less rent of shelter was up 4.6% YoY in July, down from 4.8% YoY in June.

The second graph shows that goods prices started to increase year-over-year (YoY) in 2020 and accelerated in 2021 due to both strong demand and supply chain disruptions.

Durables were at -4.1% YoY as of July 2024, down from -4.1% YoY in June.

Commodities less food and energy commodities were at -1.7% YoY in July, unchanged from -1.7% YoY in June.

Here is a graph of the year-over-year change in shelter from the CPI report (through July) and housing from the PCE report (through June)

Shelter was up 5.0% year-over-year in July, down from 5.1% in June. Housing (PCE) was up 5.3% YoY in June, down from 5.5% in May.

The BLS noted: "The index for shelter rose 0.4 percent in July, accounting for nearly 90 percent of the monthly increase in the all items index."

This is still catching up with private data.

Core CPI ex-shelter was up 1.8% YoY in July, unchanged from 1.8% in June.

by Calculated Risk on 8/14/2024 08:30:00 AM

From the BLS:

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent on a seasonally adjusted basis, after declining 0.1 percent in June, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 2.9 percent before seasonal adjustment.

The index for shelter rose 0.4 percent in July, accounting for nearly 90 percent of the monthly increase in the all items index. The energy index was unchanged over the month, after declining in the two preceding months. The index for food increased 0.2 percent in July, as it did in June. The food away from home index rose 0.2 percent over the month, and the food at home index increased 0.1 percent.

The index for all items less food and energy rose 0.2 percent in July, after rising 0.1 percent the preceding month. Indexes which increased in July include shelter, motor vehicle insurance, household furnishings and operations, education, recreation, and personal care. The indexes for used cars and trucks, medical care, airline fares, and apparel were among those that decreased over the month.

The all items index rose 2.9 percent for the 12 months ending July, the smallest 12-month increase since March 2021. The all items less food and energy index rose 3.2 percent over the last 12 months and was the smallest 12-month increase in that index since April 2021. The energy index increased 1.1 percent for the 12 months ending July. The food index increased 2.2 percent over the last year.
emphasis added

The change in both CPI and core CPI were close to expectations. I'll post a graph later today after the Cleveland Fed releases the median and trimmed-mean CPI.

by Calculated Risk on 8/14/2024 07:00:00 AM

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

Mortgage applications increased 16.8 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Applications Survey for the week ending August 9, 2024.

The Market Composite Index, a measure of mortgage loan application volume, increased 16.8 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 15 percent compared with the previous week. The Refinance Index increased 35 percent from the previous week and was 118 percent higher than the same week one year ago. The seasonally adjusted Purchase Index increased 3 percent from one week earlier. The unadjusted Purchase Index increased 2 percent compared with the previous week and was 8 percent lower than the same week one year ago.

“Rates on both 30- and 15-year fixed rate mortgages decreased for the second consecutive week, and combined with the previous week’s rate moves, spurred another strong week for application activity as borrowers with higher rates took the opportunity to refinance,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Overall applications increased almost 17 percent to the highest level since January 2023, driven by a 35 percent increase in refinance applications. The refinance index also saw its strongest week since May 2022 and was 117 percent higher than a year ago, driven by gains in conventional, FHA, and VA applications. Additionally, purchase applications increased by 3 percent, with small gains seen across the various loan types, indicating that prospective homebuyers are slowly reentering the market.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased to 6.54 percent from 6.55 percent, with points decreasing to 0.57 from 0.58 (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 8% year-over-year unadjusted.  

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

Purchase application activity is up about 10% 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 for two years - but has increased recently as mortgage rates declined.

by Calculated Risk on 8/13/2024 07:14:00 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, The Consumer Price Index for July from the BLS. The consensus is for a 0.2% increase in CPI, and a 0.2% increase in core CPI.  The consensus is for CPI to be up 3.0% year-over-year and core CPI to be up 3.2% YoY.

by Calculated Risk on 8/13/2024 03:52:00 PM

Here is a look at the change in teen employment over time.

The graph below shows the employment-population ratio for teens (16 to 19 years old) since 1948.

The graph is Not Seasonally Adjusted (NSA), to show the seasonal hiring of teenagers during the summer.

A few observations:
1) Although teen employment has recovered some since the great recession, overall teen employment had been trending down. This is probably because more people are staying in school (a long term positive for the economy).

2) Teen employment was significantly impacted in 2020 by the pandemic.

Click on graph for larger image.

3) A smaller percentage of teenagers are obtaining summer employment. The seasonal spikes are smaller than in previous decades. 

The teen employment-population ratio was 37.9% in July 2024, down from 38.0% in July 2023. The teen participation rate was 43.6% in July 2024, up from 43.1% the previous July. 

This has pushed the teen unemployment rate (NSA) up to 13.2% from 12.0% in July 2023.

So, a smaller percentage of teenagers are joining the labor force during the summer as compared to previous years. This could be because of fewer employment opportunities, or because teenagers are pursuing other activities during the summer.

The decline in teenager participation is one of the reasons the overall participation rate has declined (of course, the retiring baby boomers is the main reason the overall participation rate has declined over the last 20+ years).

by Calculated Risk on 8/13/2024 12:01:00 PM

Fannie reported results for Q2 2024. Here is some information on single-family Real Estate Owned (REOs). 

Fannie Mae reported the number of REOs decreased to 7,179 at the end of Q2 2024, down 10% from 7,971 at the end of the previous quarter, and down 17% year-over-year from Q2 2023. 

For Fannie, this is down 96% from the 166,787 peak number of REOs in Q3 2010.

Click on graph for larger image.

Here is a graph of Fannie Real Estate Owned (REO).

This is well below the normal level of REOs for Fannie, and there will not be a huge wave of foreclosures.

by Calculated Risk on 8/13/2024 08:48:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Part 1: Current State of the Housing Market; Overview for mid-August 2024

A brief excerpt:

This 2-part overview for mid-August provides a snapshot of the current housing market.

I always focus first on inventory, since inventory usually tells the tale!
...
Here is a graph of new listing from Realtor.com’s July 2024 Monthly Housing Market Trends Report showing new listings were up 3.6% year-over-year in June. New listings are still well below pre-pandemic levels. From Realtor.com:

Sellers continued to list their homes in higher numbers this July as newly listed homes were 3.6% above last year’s levels but substantially less than June’s figure of 6.3%. This marks the ninth month of increasing listing activity after a 17-month streak of decline.

Note the seasonality for new listings. December and January are seasonally the weakest months of the year for new listings, followed by February and November. New listings will be up year-over-year in 2024, but still below normal levels.

There are always people that need to sell due to the so-called 3 D’s: Death, Divorce, and Disease. Also, in certain times, some homeowners will need to sell due to unemployment or excessive debt (neither is much of an issue right now).

And there are homeowners who want to sell for a number of reasons: upsizing (more babies), downsizing, moving for a new job, or moving to a nicer home or location (move-up buyers). It is some of the “want to sell” group that has been locked in with the golden handcuffs over the last couple of years, since it is financially difficult to move when your current mortgage rate is around 3%, and your new mortgage rate will around 6.5%.

But time is a factor for this “want to sell” group, and eventually some of them will take the plunge. That is probably why we are seeing more new listings now.

There is much more in the article.

by Calculated Risk on 8/12/2024 07:10:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Effectively Unchanged to Begin New Week

Today was completely different than the previous Monday in that it was a normal, boring day with essentially no change in mortgage rates over the weekend.
...
This could change in the coming days as important new economic reports are released. Wednesday's Consumer Price Index (CPI) is the biggest deal, but tomorrow's Producer Price Index (PPI) could play a supporting role. [30 year fixed 6.55%]
emphasis added

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

8:30 AM, The Producer Price Index for July from the BLS. The consensus is for a 0.2% increase in PPI, and a 0.2% increase in core PPI.

by Calculated Risk on 8/12/2024 02:16:00 PM

The key economic report this week is July CPI to be released on Wednesday. The consensus is for a 0.2% increase in CPI, and a 0.2% increase in core CPI.  The consensus is for CPI to be up 3.0% year-over-year and core CPI to be up 3.2% YoY.

From BofA:

We forecast headline CPI rose by 0.3% m/m in July, owing mainly to a pickup in core services inflation and energy prices. This would leave the y/y rate unchanged at 3.0%. Meanwhile, we expect core CPI increased by 0.2% m/m. While this is not quite as low as June, it is in line with prior trend in deflation and should meet the Fed's benchmark for beginning rate cuts in September.

From Goldman:

We forecast a 0.16% increase (vs. 0.2% consensus) in core CPI prices in July.
We estimate a 0.17% rise in headline CPI, reflecting higher food (+0.15%) and energy (+0.4%) prices.

by Calculated Risk on 8/12/2024 11:12:00 AM

Today, in the Calculated Risk Real Estate Newsletter: 2nd Look at Local Housing Markets in July

A brief excerpt:

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

This is the second look at local markets in July. 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 July were mostly for contracts signed in May and June when 30-year mortgage rates averaged 7.06% and 6.92%, respectively (Freddie Mac PMMS).
...
In July, sales in these markets were up 4.8% YoY. Last month, in June, these same markets were down 10.9% year-over-year Not Seasonally Adjusted (NSA).

Important: 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. This is the opposite of what happened in June.

Sales in all of these markets are down significantly compared to July 2019.
...
Many more local markets to come!

There is much more in the article.