by Calculated Risk on 8/27/2024 09:09:00 AM

CR Note: On vacation. I will return on Thursday, Sept 5th (If I don't get lost!)

In December 2006, my friend Doris "Tanta" Dungey started writing for Calculated Risk.

From December 2006, until she passed away from ovarian cancer on Nov 30, 2008, Tanta was my co-blogger. Tanta worked as a mortgage banker for 20 years, and we started chatting in early 2005 about the housing bubble and the changes in lending practices. In 2006, Tanta was diagnosed with late stage cancer, and she took an extended medical leave while undergoing treatment. While on medical leave she wrote for this blog, and her writings received widespread attention and acclaim.

If you want to understand the mortgage industry, read Tanta's posts (here is The Compleat UberNerd and a Compendium of Tanta's Posts).

As an example, here is a brief excerpt from Foreclosure Sales and REO For UberNerds

The following is not an exhaustive discussion of all of the issues involved in foreclosures and REO. It’s a start at unpacking some of the concepts and definitions. We have been seeing, and are going to continue to see, a lot of information presented on foreclosure sales, REO sales, and their impacts on existing home transaction volumes and prices in various market areas. As always with “UberNerd” posts, this is long and excruciating. Proceed with typical motivation as you may consider your own best interest in an open market in blog postings.

And an excerpts from Mortgage Servicing for UberNerds

StillLearning asked in the comments about mortgage servicing, and since y’all are nerds, not dummies, here’s my highly-selective occasionally-oversimplified summary for you that skips the boring parts like how your check gets out of the “lockbox” and that stuff. We can discuss extra-credit issues like “excess servicing” and “subservicing” and “SFAS 144 meets MSR” and “negative convexity” and other kinds of inside baseball in the comments. There is a lot that can be said about loan servicing, but let’s start with the basics:

Servicers have two major types of servicing portfolio: loans they service for themselves and loans they service for other investors. In accounting terms, the “compensation” is the same, meaning that even if you are the noteholder, you pay yourself to service the loans in the same way that an outside investor would pay you, and it shows on the books that way. The differences in compensation stem from the basic fact that one is generally more motivated to do a good job servicing (particularly collecting and efficiently liquidating REO) for one’s own investment than for someone else’s.

Also see In Memoriam: Doris "Tanta" Dungey for photos, links to obituaries in the NY Times, Washington Post and much more.

by Calculated Risk on 8/24/2024 11:53:00 AM

I'll be out of contact from August 20th until Sept 4th.

I'll be back for the August employment report.

The key indicators this week include the second estimate of Q2 GDP, Personal Income and Outlays for July, and Case-Shiller house prices for June.

----- Monday, August 26th -----
8:30 AM ET: Chicago Fed National Activity Index for July. This is a composite index of other data.

8:30 AM: Durable Goods Orders for July from the Census Bureau.

10:30 AM: Dallas Fed Survey of Manufacturing Activity for August.

----- Tuesday, August 27th -----
9:00 AM: S&P/Case-Shiller House Price Index for June.

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 National index was up 5.9% in May, and is expected to slower further in June.

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

10:00 AM: Richmond Fed Survey of Manufacturing Activity for August. This is the last of the regional Fed manufacturing surveys for August.

----- Wednesday, August 28th -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

----- Thursday, August 29th -----
8:30 AM: The initial weekly unemployment claims report will be released. 

8:30 AM: Gross Domestic Product, 2nd quarter 2024 (second estimate).

10:00 AM: Pending Home Sales Index for July. 

----- Friday, August 30th -----
8:30 AM: Personal Income and Outlays, July 2024. 

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

10:00 AM: University of Michigan's Consumer sentiment index (Preliminary for August).

by Calculated Risk on 8/22/2024 09:01:00 AM

CR Note: On vacation. I will return on Thursday, Sept 5th (If I don't get lost!)

In December 2006, my friend Doris "Tanta" Dungey started writing for Calculated Risk.

When some people say that here are few women bloggers in finance and economics, I remind them that Tanta was the best of all of us!

From December 2006, until she passed away from ovarian cancer on Nov 30, 2008, Tanta was my co-blogger. Tanta worked as a mortgage banker for 20 years, and we started chatting in early 2005 about the housing bubble and the changes in lending practices. In 2006, Tanta was diagnosed with late stage cancer, and she took an extended medical leave while undergoing treatment. While on medical leave she wrote for this blog, and her writings received widespread attention and acclaim.

Here are excerpts from her first two posts:

From December 2006: Let Slip the Dogs of Hell

I still haven’t gotten over the fact that there’s a “capital management” group out there having named itself “Cerberus”. Those of you who were not asleep in Miss Buttkicker’s Intro to Western Civ will recognize Cerberus; the rest of you may have picked up the mythological fix from its reprise as “Fluffy” in the first Harry Potter novel. Wherever you get your culture, Cerberus is the three-headed dog who guards the gates of Hell. It takes three heads to do that, of course, because it’s never clear, in theology or finance, whether the idea is to keep the righteous from falling into the pit or the demons from escaping out of it (the third head is busy meeting with the regulators). Cerberus is relevant not just because it supplies me with today’s metaphor, but because it was the Biggest Dog of three (including Citigroup and Aozora, a Japanese bank) who in April bought a 51% stake in GMAC’s mega-mortgage operation, GM having, of course, once been renowned as one of the Big Three Automakers until it became one of the Big Three Financing Outfits With A Sideline In Cars. I tried to find a link for you to Aozora Bank’s announcement of the purchase, but the only press release I could find for that day involved the loss of customer data. They must have been so busy letting GMAC into the underworld that the dog head keeping the deposit tickets from getting out got distracted.
...
Now, I’m just a Little Mortgage Weenie, not a Big Finance Dog, but bear with me while I ask some stupid questions. Like: how do the Big Dogs maintain “diverse and flexible production channels” (i.e., little mortgage banker Puppies to sell you correspondent business and little broker Puppies to sell you wholesale business) when “market share currently held by top-tier players” expands to two-thirds (meaning less diverse off-load strategies for the Little Puppies in the “production channels,” putting them at further pipeline/counterparty risk unless they become Bigger Puppies, which makes them competitors instead of “channels,”), while at the same time watching some of the Little Puppies (in whom the Big Dogs have a major equity stake) crawl under the porch to die? I know Citi doesn’t seem to have noticed that the “increased regulatory scrutiny” is not just of “products” but of “wholesale operational/management controls,” but I did.

And from December 2006: On Hybrids, Teasers, and Other Mortgage Guidance Problems

First of all, a “hybrid ARM” is called a “hybrid” because it is, basically, a cross between a fixed rate and adjustable rate mortgage. Before the early 90s, an “ARM” basically meant a one-year ARM. The initial interest rate was set for one year, and the rate adjusted every year. The only real variations on this theme involved shortening the adjustment frequency: you could get an ARM that adjusted every six months instead of one year.

Around the early 90s, the “hybrid ARM” was introduced. It had an initial period in which the rate was “fixed” that didn’t match the subsequent adjustment frequency: this is the classic 3/1, 5/1, 7/1, and even 10/1 ARM. The whole idea of the hybrid ARM was to provide a kind of medium-range risk/reward tradeoff for borrowers and lenders.

CR Note: If you want to understand the mortgage industry, read Tanta's posts (here is The Compleat UberNerd and a Compendium of Tanta's Posts).

Also see In Memoriam: Doris "Tanta" Dungey for photos, links to obituaries in the NY Times, Washington Post and much more.

by Calculated Risk on 8/19/2024 07:01:00 PM

I'll be out of contact until Sept 5th.

The key housing reports over the next two weeks are existing home sales on Thursday, New Home sales on Friday, and the Case-Shiller house price index next Tuesday.

Best to all!

by Calculated Risk on 8/19/2024 04:31:00 PM

Container traffic gives us an idea about the volume of goods being exported and imported - and usually some hints about the trade report since LA area ports handle about 40% of the nation's container port traffic.

The following graphs are for inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container).

To remove the strong seasonal component for inbound traffic, the first graph shows the rolling 12-month average.

Click on graph for larger image.

On a rolling 12-month basis, inbound traffic increased 3.4% in July compared to the rolling 12 months ending in June.   Outbound traffic increased 0.7% compared to the rolling 12 months ending the previous month.

The 2nd graph is the monthly data (with a strong seasonal pattern for imports).

Usually imports peak in the July to October period as retailers import goods for the Christmas holiday, and then decline sharply and bottom in the Winter depending on the timing of the Chinese New Year.  

Imports were up 47% YoY in July, and exports were up 10% YoY.    

In general, it appears port traffic is returning to the pre-pandemic patterns - although this was a very strong July for imports as retailers prepare for holiday shopping.

by Calculated Risk on 8/19/2024 10:44:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Lawler: Early Read on Existing Home Sales in July and 3rd Look at Local Housing Markets

A brief excerpt:

From housing economist Tom Lawler:

Based on publicly-available local realtor/MLS reports released across the country through today, I project that existing home sales as estimated by the National Association of Realtors ran at a seasonally adjusted annual rate of 3.96 million in July, up 1.8% from June’s preliminary pace but down 2.2% from last July’s seasonally adjusted pace.

Unadjusted sales should show an increase from a year ago, with the SA/NSA difference reflecting the higher number of business days this July compared to last July.

Local realtor/MLS reports suggest that the median existing single-family home sales price last month was up by about 3.9% from a year earlier.

CR Note: The National Association of Realtors (NAR) is scheduled to release July Existing Home Sales on Thursday, August 22nd at 10 AM ET. The consensus is for 3.90 million SAAR, up from 3.89 million last month.
...
In July, sales in these markets were up 3.8% YoY. Last month, in June, these same markets were down 12.8% 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 compared to July 2019.
...
More local markets to come!

There is much more in the article.

by Calculated Risk on 8/19/2024 08:12:00 AM

Altos reports that active single-family inventory was up 0.8% week-over-week. Inventory is now up 41.4% from the February seasonal bottom.

Click on graph for larger image.

This inventory graph is courtesy of Altos Research.

As of August 16th, inventory was at 698 thousand (7-day average), compared to 693 thousand the prior week.   

This is the highest level of inventory since June 2020; however, inventory is still well 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 40.4% compared to the same week in 2023 (last week it was up 40.5%), and down 26.8% compared to the same week in 2019 (last week it was down 27.5%). 

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 8/18/2024 06:46:00 PM

Weekend:
• Schedule for Week of August 18, 2024

Monday:
• No major economic releases scheduled.

From CNBC: Pre-Market Data and Bloomberg futures S&P 500 are up 6 and DOW futures are up 39 (fair value).

Oil prices were up mostly unchanged over the last week with WTI futures at $76.65 per barrel and Brent at $79.68 per barrel. A year ago, WTI was at $81, and Brent was at $86 - 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 $3.38 per gallon. A year ago, prices were at $3.84 per gallon, so gasoline prices are down $0.43 year-over-year.

by Calculated Risk on 8/18/2024 09:12:00 AM

From STR: U.S. hotel results for week ending 10 August

The U.S. hotel industry reported positive comparisons year over year, according to CoStar’s latest data through 10 August. ...

4-10 August 2024 (percentage change from comparable week in 2023):

• Occupancy: 68.7% (+0.5%)
• Average daily rate (ADR): US$159.49 (+1.4%)
• Revenue per available room (RevPAR): US$109.51 (+1.9%)
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 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 has peaked for 2024, and the average will start declining into the late summer and early Fall.

by Calculated Risk on 8/17/2024 02:11:00 PM

At the Calculated Risk Real Estate Newsletter this week:

Click on graph for larger image.

• Housing Starts: Single Family Down Year-15% over-year in July; Multi-Family Down 18% YoY

• Part 1: Current State of the Housing Market; Overview for mid-August 2024

• Part 2: Current State of the Housing Market; Overview for mid-August 2024

• MBA: Mortgage Delinquencies Increased in Q2 2024

• 2nd Look at Local Housing Markets in July

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