by Calculated Risk on 9/27/2024 05:32:00 PM

Today, in the Calculated Risk Real Estate Newsletter: Fannie and Freddie: Single Family Serious Delinquency Rate Ticked Up in August

Brief excerpt:

Single-family serious delinquencies increased slightly in August, and multi-family serious delinquencies decreased slightly.
...
Freddie Mac reports that the multi-family delinquencies rate decreased to 0.38% in August, down from 0.39% in July, and down from the recent peak of 0.44% in January.

This graph shows the Freddie multi-family serious delinquency rate since 2012. Rates were still high in 2012 following the housing bust and financial crisis.

The multi-family rate increased following the pandemic and has increased recently as rent growth slowed, vacancy rates increased and borrowing costs increased sharply. The rate surged higher in January and has moved mostly sideways at an elevated level since then.

There is much more in the article.

by Calculated Risk on 9/27/2024 11:46:00 AM

Note: This is a repeat sales index (like Case-Shiller and FHFA). ICE is releasing this index early this month. 

Several cities in Florida are now seeing year-over-year price declines (as inventory surges).

From ICE:

• Home prices continued to cool in August, with prices up +3.0% from the same time last year according to the ICE Home Price Index, marking the slowest rate of home price growth in over a year

• On an adjusted basis prices rose by +0.12% in the month – the slowest adjusted monthly growth since last November – equivalent to a seasonally adjusted annualized rate (SAAR) of +1.4%

• While those soft monthly gains suggest that the annual home price growth rate may slow further in September, the market may be poised to catch a two different tail winds in coming months

• The first will come from softer comparable sales from late 2023 when mortgage rates had climbed above 7.5%, with the second coming from easing 30-year rates and improved affordability in September

• August home price gains were driven by mortgage rates in the high 6% range in July, before they trended sharply lower through August and September

• September home prices were driven by rates in the mid-6% range, while October prices will be driven by 30-year rates that have been in the low 6% range

• It will be worth watching the housing supply/demand and price dynamics closely in coming months given the sharp downward trend in mortgage rates in recent weeks Price growth slowed across two-thirds of the nation’s largest markets in August

• The strongest cooling was seen in the Midwest and Northeast – areas of the country that, while slightly cooler than recent months, continue to see the strongest home price growth nationwide

• On the other end of the spectrum, 1 in 4 of the nation’s largest markets saw prices edge lower on a seasonally adjusted basis, led by North Port, Cape Coral, Austin TX, Memphis, Tucson, and Atlanta

• A dozen major markets are now seeing home prices below last year’s levels, including Cape Coral and North Port where prices are down 6.4% and 5.7%, respectively, from this same time last year

• Of the 12 markets where prices have fallen over the past 12 months, 7 are in the state of Florida along with San Francisco, Austin, San Antonio, Memphis, and New Orleans
emphasis added

by Calculated Risk on 9/27/2024 10:50:00 AM

From BofA:

Since our last weekly publication, our 3Q GDP tracking estimate is down two-tenths to 2.3% q/q saar while 2Q GDP came in at 3.0% q/q saar in the final official estimate. [Sept 27th estimate]
emphasis added

From Goldman:

The details of yesterday’s durable goods report and this morning’s Advance Economic Indicators report were stronger than our previous GDP tracking assumptions, while the details of the PCE report were slightly softer. On net, we boosted our Q3 GDP tracking estimate by 0.2pp to +3.2% (quarter-over-quarter annualized). Our Q3 domestic final sales estimate stands at +2.8%. [Sept 27th 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 3.1 percent on September 27, up from 2.9 percent on September 18. After recent releases from the US Census Bureau, the US Bureau of Economic Analysis, and the National Association of Realtors, a decline in the nowcast of real personal consumption expenditures growth was more than offset by increases in the nowcasts of real gross private domestic investment growth and the contribution of net exports to third-quarter real GDP growth. [Sept 27th estimate]

by Calculated Risk on 9/27/2024 09:15:00 AM

Here is a graph of the year-over-year change in shelter from the CPI report and housing from the PCE report this morning, both through August 2024.

CPI Shelter was up 5.2% year-over-year in August, up from 5.0 in July, and down from the cycle peak of 8.2% in March 2023.

Housing (PCE) was up 5.3% YoY in August, up from 5.2% in July, and down from the cycle peak of 8.3% in April 2023.

Since asking rents are mostly flat year-over-year, these measures will slowly continue to decline over the next year.

The second graph shows PCE prices, Core PCE prices and Core ex-housing over the last 3 months (annualized):

Key measures are slightly below the Fed's target on a 3-month basis. Note: There appears to be some residual seasonality distorting PCE prices in Q1, especially in January.

3-month annualized change:

PCE Price Index: 1.5%
Core PCE Prices: 2.1%
Core minus Housing: 1.5%

by Calculated Risk on 9/27/2024 08:30:00 AM

The BEA released the Personal Income and Outlays report for August:

Personal income increased $50.5 billion (0.2 percent at a monthly rate) in August, according to estimates released today by the U.S. Bureau of Economic Analysis. Disposable personal income (DPI), personal income less personal current taxes, increased $34.2 billion (0.2 percent) and personal consumption expenditures (PCE) increased $47.2 billion (0.2 percent).

The PCE price index increased 0.1 percent. Excluding food and energy, the PCE price index increased 0.1 percent. Real DPI increased 0.1 percent in August and real PCE increased 0.1 percent; goods increased less than 0.1 percent and services increased 0.2 percent.
emphasis added

The August PCE price index increased 2.2 percent year-over-year (YoY), down from 2.5 percent YoY in July, and down from the recent peak of 7.2 percent in June 2022.

The PCE price index, excluding food and energy, increased 2.7 percent YoY, up from 2.6 percent in July, and down from the recent peak of 5.6 percent in February 2022.

The following graph shows real Personal Consumption Expenditures (PCE) through August 2024 (2017 dollars). Note that the y-axis doesn't start at zero to better show the change.

Click on graph for larger image.

The dashed red lines are the quarterly levels for real PCE.

Personal income was above expectations, and PCE was below expectations.

Inflation was below expectations.

Using the two-month method to estimate Q3 real PCE growth, real PCE was increasing at a 3.3% annual rate in Q3 2024. (Using the mid-month method, real PCE was increasing at 2.6%).  This suggests solid PCE growth in Q3.

by Calculated Risk on 9/26/2024 08:21:00 PM

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

Thursday:
• At 8:30 AM ET Personal Income and Outlays, August 2024.  The consensus is for a 0.4% increase in personal income, and for a 0.3% increase in personal spending. And for the Core PCE price index to increase 0.2%.

• At 10:00 AM, University of Michigan's Consumer sentiment index (Final for September). The consensus is for a reading of 67.7.

by Calculated Risk on 9/26/2024 04:19:00 PM

From WardsAuto: September U.S. Light-Vehicle Sales Forecast for 9-Month-High SAAR Despite Drop in Volume (pay content).  Brief excerpt:

If September’s outlook holds true, Q3 sales will decline 1.8% year-over-year. However, deliveries in October-December, goosed by two additional selling days vs. the year-ago period, are forecast to rise 7.4% from like-2023, leaving volume for entire-2024 at 15.9 million, up from 2023’s 15.5 million.
emphasis added

Click on graph for larger image.

This graph shows actual sales from the BEA (Blue), and Wards forecast for September (Red).

On a seasonally adjusted annual rate basis, the Wards forecast of 16.1 million SAAR, would be up 6.4% from last month, and up 2.1% from a year ago.

by Calculated Risk on 9/26/2024 12:26:00 PM

Today, in the Calculated Risk Real Estate Newsletter: Inflation Adjusted House Prices 1.5% Below 2022 Peak

Excerpt:

It has been over 18 years since the bubble peak. In the July Case-Shiller house price index on Tuesday, the seasonally adjusted National Index (SA), was reported as being 74% above the bubble peak in 2006. However, in real terms, the National index (SA) is about 11% above the bubble peak (and historically there has been an upward slope to real house prices).  The composite 20, in real terms, is 2% above the bubble peak.

People usually graph nominal house prices, but it is also important to look at prices in real terms.  As an example, if a house price was $300,000 in January 2010, the price would be $432,000 today adjusted for inflation (44% increase).  That is why the second graph below is important - this shows "real" prices.

The third graph shows the price-to-rent ratio, and the fourth graph is the affordability index. The last graph shows the 5-year real return based on the Case-Shiller National Index.
...
The second graph shows the same two indexes in real terms (adjusted for inflation using CPI).

In real terms (using CPI), the National index is 1.5% below the recent peak, and the Composite 20 index is 1.8% below the recent peak in 2022. Both indexes increased in July in real terms.

It has now been 26 months since the real peak in house prices. Typically, after a sharp increase in prices, it takes a number of years for real prices to reach new highs (see House Prices: 7 Years in Purgatory)

by Calculated Risk on 9/26/2024 10:00:00 AM

From the NAR: Pending Home Sales Edged Up 0.6% in August

Pending home sales in August rose 0.6%, according to the National Association of REALTORS®. The Midwest, South and West posted monthly gains in transactions, while the Northeast recorded a loss. Year-over-year, the West registered growth, but the Northeast, Midwest and South declined.

The Pending Home Sales Index (PHSI)* – a forward-looking indicator of home sales based on contract signings – increased to 70.6 in August. Year over year, pending transactions were down 3.0%. An index of 100 is equal to the level of contract activity in 2001.

“A slight upward turn reflects a modest improvement in housing affordability, primarily because mortgage rates descended to 6.5% in August,” said NAR Chief Economist Lawrence Yun. “However, contract signings remain near cyclical lows even as home prices keep marching to new record highs.”
...
The Northeast PHSI diminished 4.6% from last month to 61.6, a drop of 2.2% from August 2023. The Midwest index intensified 3.2% to 70.0 in August, down 3.6% from one year ago.

The South PHSI grew 0.1% to 83.6 in August, receding 5.3% from the prior year. The West index increased 3.2% in August to 58.0, up 2.7% from August 2023.
emphasis added

This was well below expectations. Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in September and October.

by Calculated Risk on 9/26/2024 08:39:00 AM

The DOL reported:

In the week ending September 21, the advance figure for seasonally adjusted initial claims was 218,000, a decrease of 4,000 from the previous week's revised level. The previous week's level was revised up by 3,000 from 219,000 to 222,000. The 4-week moving average was 224,750, a decrease of 3,500 from the previous week's revised average. The previous week's average was revised up by 750 from 227,500 to 228,250.
emphasis added

The following graph shows the 4-week moving average of weekly claims since 1971.

Click on graph for larger image.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased to 224,750.

The previous week was revised up.

Weekly claims were below the consensus forecast.