by Calculated Risk on 9/15/2024 10:17:00 AM

Most analysts expect the FOMC will cut the federal funds rate at the meeting this week by 25bp lowering the target range to 5 to 5-1/4 percent.   It is possible the FOMC will cut by 50bp.

Currently market participants are split evenly between a 25bp and a 50bp cut this week.  Market participants are also pricing in a total of 75bp in cuts by the November meeting, and between 100bp to 125bp in cuts by December.

From BofA:

Next week, the Fed is widely expected to end the longest hold after a hiking cycle in its history (Exhibit 1).

We look for the Fed to cut rates by 25bp, which should kick off a series of 25bp cuts over the next five meetings. Markets still perceive a meaningful risk of a 50bp cut next week, but this week’s data leave us comfortable with our 25bp call. The main message from the meeting should be one of cautious optimism despite greater concerns over downside risks.
emphasis added

Projections will be released at this meeting. For review, here are the June projections. 

Since the last projections were released, economic growth has been above expectations, the unemployment rate is slightly above expectations, 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 second estimate for Q2 GDP showed real growth at 3.0% annualized, following 1.4% annualized real growth in Q1.  Current estimates for Q3 GDP are around 2.5%.  That puts real growth in the first 3 quarters at the top end 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 4.2% in August.  This is at 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 July 2024, PCE inflation increased 2.5 percent year-over-year (YoY). This is at the low end of the June projections.  Current analyst estimates are that PCE inflation will fall to 2.3% YoY in August.

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 July. This is lower than the June FOMC projections for Q4, although analysts expect core PCE inflation to tick up slightly in August.

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 9/14/2024 02:11:00 PM

At the Calculated Risk Real Estate Newsletter this week:

Click on graph for larger image.

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

• The "Home ATM" Mostly Closed in Q2

• 2nd Look at Local Housing Markets in August

• Asking Rents Mostly Unchanged Year-over-year

• ICE Mortgage Monitor: House Price Growth Slows, Inventory Surges in Florida and Texas

• 1st Look at Local Housing Markets in August

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

by Calculated Risk on 9/14/2024 08:11:00 AM

The key reports this week are August Retail Sales, Housing Starts and Existing Home sales.

For manufacturing, August Industrial Production, and the September New York and Philly Fed surveys will be released this week.

The FOMC meets this week and is expected to cut rates.

----- Monday, September 16th -----
8:30 AM ET: The New York Fed Empire State manufacturing survey for September. The consensus is for a reading of -4.0, up from -4.7.


----- Tuesday, September 17th -----
8:30 AM ET: Retail sales for August will be released.  The consensus is for a 0.2% increase in retail sales.

This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline).

9:15 AM: The Fed will release Industrial Production and Capacity Utilization for August.

This graph shows industrial production since 1967.

The consensus is for a 0.1% increase in Industrial Production, and for Capacity Utilization to increase to 77.9%.

10:00 AM: The September NAHB homebuilder survey. The consensus is for a reading of 40, up from 39 in August. Any number below 50 indicates that more builders view sales conditions as poor than good.

----- Wednesday, September 18th -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:30 AM: Housing Starts for August.

This graph shows single and total housing starts since 1968.

The consensus is for 1.250 million SAAR, up from 1.238 million SAAR.

During the day: The AIA's Architecture Billings Index for August (a leading indicator for commercial real estate).

2:00 PM: FOMC Meeting Announcement. The Fed is expected to cut rates 25bp at this meeting.

2:00 PM: FOMC Forecasts This will include the Federal Open Market Committee (FOMC) participants' projections of the appropriate target federal funds rate along with the quarterly economic projections.

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

----- Thursday, September 19th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for 235 thousand initial claims, up from 230 thousand last week.

8:30 AM: the Philly Fed manufacturing survey for September. The consensus is for a reading of 2.0, up from -7.0.

10:00 AM: Existing Home Sales for August from the National Association of Realtors (NAR). The consensus is for 3.85 million SAAR, down from 3.95 million in July.

The graph shows existing home sales from 1994 through the report last month.

----- Friday, September 20th -----
10:00 AM: State Employment and Unemployment (Monthly) for August 2024

by Calculated Risk on 9/13/2024 07:23:00 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	998	998	≤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.  

Weekly deaths are more than triple the low of 302 in early June.

And here is a graph I'm following concerning COVID in wastewater as of September 13th:

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

COVID in wastewater is mostly moving sideways.

by Calculated Risk on 9/13/2024 03:13:00 PM

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

A brief excerpt:

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

This is the second look at several early reporting local markets in August. 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 August were mostly for contracts signed in June and July when 30-year mortgage rates averaged 6.92% and 6.85%, respectively (Freddie Mac PMMS).
...
In August, sales in these markets were down 5.3% YoY. Last month, in July, these same markets were up 4.1% year-over-year Not Seasonally Adjusted (NSA).

Important: There was one fewer working day in August 2024 compared to August 2023 (22 vs 23), so seasonally adjusted sales up be up more than NSA sales. Last month, in July 2024, there were two more working days compared to July 2023 (22 vs 20), so seasonally adjusted sales were lower than the NSA data suggests.
...
This was just a several early reporting markets. Many more local markets to come!

There is much more in the article.

by Calculated Risk on 9/13/2024 09:16:00 AM

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

A brief excerpt:

This 2-part overview for mid-September 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 August 2024 Monthly Housing Market Trends Report showing new listings were down 0.9% year-over-year in August. New listings are still well below pre-pandemic levels. From Realtor.com:

Just like buyers, sellers pulled back this August as newly listed homes were 0.9% below last year’s levels and a reversal from July’s 8.4% gain. This breaks a nine-month streak of increasing listing activity. We think the sharp decrease in mortgage rates seen in mid-August could lead to an increase in listings in the coming months as lower rates begin to entice the marginal homeowner to sell.

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, except possibly in Florida with very expensive homeowner’s insurance (due to impacts from climate change), and special assessments for condo owners due to deferred maintenance.

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 6.15%.

But time is a factor for this “want to sell” group, and eventually some of them will take the plunge. And early data suggests new listings will be up year-over-year in September.

There is much more in the article.

by Calculated Risk on 9/13/2024 08:17:00 AM

From BofA:

Since our last weekly publication, our 3Q GDP tracking estimate remains unchanged at 2.3% q/q saar while our 2Q GDP tracking estimate went down two-tenths to 2.8% q/q saar. [Sept 13th estimate]
emphasis added

From Goldman:

We lowered our Q3 GDP forecast to 2.5% (qoq ar) [Sept 10th estimate]

And from the Atlanta Fed: GDPNow

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2024 is 2.5 percent on September 9, up from 2.1 percent on September 4. [Sept 9th estimate]

by Calculated Risk on 9/12/2024 07:06:00 PM

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

Friday:
• At 10:00 AM: University of Michigan's Consumer sentiment index (Preliminary for September).

by Calculated Risk on 9/12/2024 04:30:00 PM

What this means: On a weekly basis, Realtor.com reports the year-over-year change in active inventory and new listings. On a monthly basis, they report total inventory. For August, Realtor.com reported inventory was up 5.8% YoY, but still down 26.4% compared to the 2017 to 2019 same month levels. 

 Now - on a weekly basis - inventory is up 33.4% YoY.

Realtor.com has monthly and weekly data on the existing home market. Here is their weekly report: Weekly Housing Trends View—Data for Week Ending Sept. 7, 2024

• Active inventory increased, with for-sale homes 33.4% above year-ago levels

For the 44th consecutive week dating to November 2023, the number of listings for sale has grown year over year, and this week continues a string of growth rates in the mid-30% range that started in April. This is a slight decrease from last week’s gain of 34.6%.

• New listings—a measure of sellers putting homes up for sale—ticked higher this week by 9.9% from one year ago

The recent easing of mortgage rates has encouraged many sellers to return to the market, with the year-over-year growth in new listings experiencing its largest increase in a month. What’s more, the rate was nearly double last week’s gain of 5.5%.

Here is a graph of the year-over-year change in inventory according to realtor.com. 

Inventory was up year-over-year for the 44th consecutive week.  

However, inventory is still historically low.

New listings remain below typical pre-pandemic levels.

by Calculated Risk on 9/12/2024 12:58:00 PM

Today, in the Real Estate Newsletter: The "Home ATM" Mostly Closed in Q2

Excerpt:

During the housing bubble, many homeowners borrowed heavily against their perceived home equity - jokingly calling it the “Home ATM” - and this contributed to the subsequent housing bust, since so many homeowners had negative equity in their homes when house prices declined.

Unlike during the housing bubble, very few homeowners have negative equity now. From CoreLogic this morning: Homeowner Equity Insights – Q2 2024

The report shows that U.S. homeowners with mortgages (which account for roughly 62% of all properties) saw home equity increase by 8.0% year over year, representing a collective gain of $1.3 trillion and an average increase of $25,000 per borrower since the second quarter of 2023, bringing the total net homeowner equity to over $17.6 trillion in the second quarter of 2024. …

From the second quarter of 2023 to the second quarter of 2024, the total number of mortgaged homes in negative equity decreased by 4.2%, to 1 million homes or 1.7% of all mortgaged properties. 

Here is the quarterly increase in mortgage debt from the Federal Reserve’s Financial Accounts of the United States - Z.1 (sometimes called the Flow of Funds report) released today. In the mid ‘00s, there was a large increase in mortgage debt associated with the housing bubble.

In Q2 2024, mortgage debt increased $99 billion, up from $31 billion in Q1, and down from the cycle peak of $467 billion in Q2 2021. Note the almost 7 years of declining mortgage debt as distressed sales (foreclosures and short sales) wiped out a significant amount of debt.

However, some of this debt is being used to increase the housing stock (purchase new homes), so this isn’t all Mortgage Equity Withdrawal (MEW).

There is much more in the article. You can subscribe at https://calculatedrisk.substack.com/.