by Calculated Risk on 8/14/2024 07:22:00 PM

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

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released.  The consensus is for 238 thousand initial claims, up from 233 thousand last week.

• Also at 8:30 AM, Retail sales for July is scheduled to be released.  The consensus is for 0.3% increase in retail sales.

• Also at 8:30 AM, The New York Fed Empire State manufacturing survey for August. The consensus is for a reading of -6.0, up from -6.6.

• Also at 8:30 AM, the Philly Fed manufacturing survey for August. The consensus is for a reading of 6.5, down from 14.0.

• At 9:15 AM, The Fed will release Industrial Production and Capacity Utilization for July. The consensus is for a 0.1% increase in Industrial Production, and for Capacity Utilization to decrease to 78.7%.

• At 10:00 AM, The August NAHB homebuilder survey. The consensus is for a reading of 42, unchanged from 42. Any number below 50 indicates that more builders view sales conditions as poor than good.

by Calculated Risk on 8/14/2024 02:58:00 PM

The Cleveland Fed released the median CPI and the trimmed-mean CPI.

According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.3% in July. The 16% trimmed-mean Consumer Price Index increased 0.2%. "The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics’ (BLS) monthly CPI report".

Click on graph for larger image.

This graph shows the year-over-year change for these four key measures of inflation. 

On a year-over-year basis, the median CPI rose 4.3% (up from 4.2% in June), the trimmed-mean CPI rose 3.2% (down from 3.3%), and the CPI less food and energy rose 3.3% (unchanged from 3.3%). 

Core PCE is for July was up 2.6% YoY, unchanged from 2.6% in June.

Note: The Cleveland Fed released the median CPI details. Fuel oil and other fuels increased at a 25% annual rate in July.

Rent and Owner's equivalent rent are still high, and if we exclude rent, median CPI would be around 1.5% month-over-month, annualized. 

by Calculated Risk on 8/14/2024 01:37:00 PM

The BLS reported this morning:

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased 2.9 percent over the last 12 months to an index level of 308.501 (1982-84=100). For the month, the index increased 0.1 percent prior to seasonal adjustment.

CPI-W is the index that is used to calculate the Cost-Of-Living Adjustments (COLA). The calculation dates have changed over time (see Cost-of-Living Adjustments), but the current calculation uses the average CPI-W for the three months in Q3 (July, August, September) and compares to the average for the highest previous average of Q3 months. Note: this is not the headline CPI-U and is not seasonally adjusted (NSA).

• In 2023, the Q3 average of CPI-W was 301.236.

The 2023 Q3 average was the highest Q3 average, so we only have to compare Q3 this year to last year.

Click on graph for larger image.

This graph shows CPI-W since January 2000. The red lines are the Q3 average of CPI-W for each year.

Note: The year labeled is for the calculation, and the adjustment is effective for December of that year (received by beneficiaries in January of the following year).

CPI-W was up 2.9% year-over-year in July, and although this is early - we need the data for July, August and September - my early guess is COLA will probably be around 2.4% this year, the smallest increase since 1.3% in 2021.

Contribution and Benefit Base

The contribution base will be adjusted using the National Average Wage Index. This is based on a one-year lag. The National Average Wage Index is not available for 2023 yet, although we know wages increased solidly in 2023. If wages increased 5% in 2023, then the contribution base next year will increase to around $177,000 in 2025, from the current $168,600.

Remember - this is an early look. What matters is average CPI-W, NSA, for all three months in Q3 (July, August and September).

by Calculated Risk on 8/14/2024 10:21:00 AM

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

A brief excerpt:

Yesterday, in Part 1: Current State of the Housing Market; Overview for mid-August 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 less YoY in the June Case-Shiller index than in the May report. The NAR reported median prices were up 4.1% YoY in June, down from 5.2% YoY in May.

ICE reported prices were up 4.1% YoY in June, down from 4.7% YoY in May, and Freddie Mac reported house prices were up 5.2% YoY in June, down from 5.7% YoY in May.

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 June compared to May.

There is much more in the article.

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.