RSS Feed by Calculated Risk on 9/17/2024 08:30:00 AM
Tuesday, September 17, 2024
Retail Sales Increased 0.1% in August
On a monthly basis, retail sales increased 0.1% from July to August (seasonally adjusted), and sales were up 2.1 percent from August 2023.
From the Census Bureau report:
Advance estimates of U.S. retail and food services sales for August 2024, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $710.8 billion, an increase of 0.1 percent from the previous month, and up 2.1 percent from August 2023. ... The June 2024 to July 2024 percent change was revised from up 1.0 percent to up 1.1 percent.
emphasis added
Click on graph for larger image.This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline).
Retail sales ex-gasoline was up 0.1% in August.
The second graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993.
Retail and Food service sales, ex-gasoline, increased by 3.0% on a YoY basis.
The change in sales in August was slightly below expectations, however sales in June and July were revised up, combined.
Monday, September 16, 2024
Tuesday: Retail Sales, Industrial Production, Homebuilder Survey
by Calculated Risk on 9/16/2024 07:01:00 PM
From Matthew Graham at Mortgage News Daily: Mortgage Rates Inch Lower to Begin Potentially Wild Week
The new week began on a relatively quiet note in terms of mortgage rate movement and the underlying bond market. ... Traders have quickly shifted back to expecting slightly better odds of a 0.50% rate cut versus the minimum 0.25%. That's not even the important part of the announcement, however. Markets will be more focused on the rate trajectory outlined in the Fed's economic projections as well as the guidance offered in the text of the announcement and Fed Chair Powell's press conference. ... Any time an outcome is guaranteed to surprise about half the market, it's pretty much impossible to avoid volatility. [30 year fixed 6.12%]Tuesday:
emphasis added
• At 8:30 AM ET, Retail sales for August will be released. The consensus is for a 0.2% increase in retail sales.
• At 9:15 AM, The Fed will release Industrial Production and Capacity Utilization for August. The consensus is for a 0.1% increase in Industrial Production, and for Capacity Utilization to increase to 77.9%.
• At 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.
Part 2: Current State of the Housing Market; Overview for mid-September 2024
by Calculated Risk on 9/16/2024 02:46:00 PM
Today, in the Calculated Risk Real Estate Newsletter: Part 2: Current State of the Housing Market; Overview for mid-September 2024
A brief excerpt:
On Friday, in Part 1: Current State of the Housing Market; Overview for mid-September 2024 I reviewed home inventory, housing starts and sales.There is much more in the article.
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 July Case-Shiller index than in the June report. The NAR reported median prices were up 4.2% YoY in July, up from 4.1% YoY in June.
ICE reported prices were up 3.6% YoY in July, down from 4.1% YoY in June, and Freddie Mac reported house prices were up 4.4% YoY in July, down from 5.2% YoY in June.
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 July compared to June.
Update: The Art of the Soft Landing
by Calculated Risk on 9/16/2024 01:06:00 PM
Back in June, I wrote: The Art of the Soft Landing
A few excerpts and an updated graph ...
The "Art of the Soft Landing" requires that the Fed reduce rates quick enough to keep economic growth positive, and slow enough not to reignite inflation. My view is a soft landing is achieved if growth stays positive, inflation returns to target, and the yield curve flattens or reverts to normal (long yields higher than short yields).The good news is growth has stayed positive and inflation has moved closer to the 2% target. However, the yield curve is still inverted, and we are not out of the woods yet.
Here is an updated graph of 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity from FRED since 1976. The yield curve is no longer inverted. The next 6 months or so will tell the tale if the Fed reduced rates quick enough to accomplish a soft landing. That probably means the Fed Funds rate will need to be down to around 4% or so.
Q2 Update: Delinquencies, Foreclosures and REO
by Calculated Risk on 9/16/2024 11:24:00 AM
Today, in the Calculated Risk Real Estate Newsletter: Q2 Update: Delinquencies, Foreclosures and REO
A brief excerpt:
We will NOT see a surge in foreclosures that would significantly impact house prices (as happened following the housing bubble) for two key reasons: 1) mortgage lending has been solid, and 2) most homeowners have substantial equity in their homes.There is much more in the article.
...
And on mortgage rates, here is some data from the FHFA’s National Mortgage Database showing the distribution of interest rates on closed-end, fixed-rate 1-4 family mortgages outstanding at the end of each quarter since Q1 2013 through Q1 2024 (Q2 2024 data will be released in two weeks).
This shows the surge in the percent of loans under 3%, and also under 4%, starting in early 2020 as mortgage rates declined sharply during the pandemic. Currently 21.9% of loans are under 3%, 57.3% are under 4%, and 76.0% are under 5%.
With substantial equity, and low mortgage rates (mostly at a fixed rates), few homeowners will have financial difficulties.
Housing Sept 16th Weekly Update: Inventory up 1.4% Week-over-week, Up 37.4% Year-over-year
by Calculated Risk on 9/16/2024 08:11:00 AM
Altos reports that active single-family inventory was up 1.4% week-over-week. Inventory is now up 44.5% from the February seasonal bottom.
Click on graph for larger image.This inventory graph is courtesy of Altos Research.
As of September 13th, inventory was at 714 thousand (7-day average), compared to 704 thousand the prior week.
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 37.4% compared to the same week in 2023 (last week it was up 38.0%), and down 25.2% compared to the same week in 2019 (last week it was down 25.7%).
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.
Sunday, September 15, 2024
Sunday Night Futures
by Calculated Risk on 9/15/2024 06:52:00 PM
Weekend:
• Schedule for Week of September 15, 2024
• FOMC Preview: Fed to Cut Rates
Monday:
• 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.
From CNBC: Pre-Market Data and Bloomberg futures S&P 500 are up 5 and DOW futures are up 69 (fair value).
Oil prices were up over the last week with WTI futures at $68.65 per barrel and Brent at $71.61 per barrel. A year ago, WTI was at $91, and Brent was at $96 - so WTI oil prices are down about 25% year-over-year.
Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $3.13 per gallon. A year ago, prices were at $3.85 per gallon, so gasoline prices are down $0.72 year-over-year.
FOMC Preview: Fed to Cut Rates
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.
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 | |
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 | |
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 | |
Saturday, September 14, 2024
Real Estate Newsletter Articles this Week: The "Home ATM" Mostly Closed in Q2
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.
Schedule for Week of September 15, 2024
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.
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.
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.
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.
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.
10:00 AM: State Employment and Unemployment (Monthly) for August 2024
