by Calculated Risk on 10/17/2024 07:51:00 PM

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

Thursday:
• At 8:30 AM ET, Housing Starts for September. The consensus is for 1.350 million SAAR, down from 1.356 million SAAR.

by Calculated Risk on 10/17/2024 04:01:00 PM

Earlier from the Fed: Industrial Production and Capacity Utilization

Industrial production (IP) decreased 0.3 percent in September after advancing 0.3 percent in August. A strike at a major producer of civilian aircraft held down total IP growth by an estimated 0.3 percent in September, and the effects of two hurricanes subtracted an estimated 0.3 percent. For the third quarter as a whole, industrial production declined at an annual rate of 0.6 percent. Manufacturing output moved down 0.4 percent in September, and the index for mining fell 0.6 percent. The index for utilities gained 0.7 percent. At 102.6 percent of its 2017 average, total industrial production in September was 0.6 percent below its year-earlier level. Capacity utilization edged down to 77.5 percent in September, a rate that is 2.2 percentage points below its long-run (1972–2023) average.
emphasis added

Click on graph for larger image.

This graph shows Capacity Utilization. This series is up from the record low set in April 2020, and above the level in February 2020 (pre-pandemic).

Capacity utilization at 77.5% is 2.2% below the average from 1972 to 2022.  This was below consensus expectations.

Note: y-axis doesn't start at zero to better show the change.

The second graph shows industrial production since 1967.

Industrial production decreased to 102.6. This is above the pre-pandemic level.

Industrial production was below consensus expectations.

by Calculated Risk on 10/17/2024 12:57:00 PM

Today, in the Calculated Risk Real Estate Newsletter: 3rd Look at Local Housing Markets in September

A brief excerpt:

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

This is the third look at several early reporting local markets in September. 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 September were mostly for contracts signed in July and August when 30-year mortgage rates averaged 6.85% and 6.50%, respectively (Freddie Mac PMMS).
...
In September, sales in these markets were down 6.0% YoY. Last month, in August, these same markets were down 5.2% year-over-year Not Seasonally Adjusted (NSA).

Important: There were the same number of working days in September 2024 (20) as in September 2023 (20). So, the year-over-year change in the headline SA data will be similar to the NSA data. Last month there was one fewer working day in August 2024 compared to August 2023 (22 vs 23), so seasonally adjusted sales were down less than NSA sales.
...
Last year, the NAR reported sales in September 2023 at 3.98 million SAAR.  This data suggests that the September existing home sales report will show a year-over-year decline.  The cycle low was 3.85 million SAAR in October 2023.  A new cycle low is possible.
...
More local markets to come!

There is much more in the article.

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

The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 43, up from 41 last month. Any number below 50 indicates that more builders view sales conditions as poor than good.

From the NAHB: Builder Confidence Edges Higher Despite Affordability Headwinds

With inflation gradually easing and builders anticipating mortgage rates will moderate in coming months, builder sentiment moved higher for a second consecutive month despite challenging affordability conditions.

Builder confidence in the market for newly built single-family homes was 43 in October, up two points from a reading of 41 in September, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released today.

“While housing affordability remains low, builders are feeling more optimistic about 2025 market conditions,” said NAHB Chairman Carl Harris, a custom home builder from Wichita, Kan. “The wild card for the outlook remains the election, and with housing policy a top tier issue for candidates, policymakers should be focused on supply-side solutions to the housing crisis.”

“Despite the beginning of the Fed’s easing cycle, many prospective home buyers remain on the sideline waiting for lower interest rates,” said NAHB Chief Economist Robert Dietz. “We are forecasting uneven declines for mortgage interest rates in the coming quarters, which will improve housing demand but place stress on building lot supplies due to tight lending conditions for development and construction loans.”

The latest HMI survey also revealed that the share of builders cutting prices held steady at 32% in October, the same rate as last month. Meanwhile, the average price reduction returned to the long-term trend of 6% after dropping to 5% in September. The use of sales incentives was 62% in October, slightly up from 61% in September.
...
All three HMI indices were up in October. The index charting current sales conditions rose two points to 47, the component measuring sales expectations in the next six months increased four points to 57 and the gauge charting traffic of prospective buyers posted a two-point gain to 29.

Looking at the three-month moving averages for regional HMI scores, the Northeast increased two points to 51, the Midwest moved two points higher to 41, the South held steady at 41 and the West increased three points to 41.
emphasis added

Click on graph for larger image.

This graph shows the NAHB index since Jan 1985.

This was slightly above the consensus forecast.

by Calculated Risk on 10/17/2024 08:45:00 AM

The DOL reported:

In the week ending October 12, the advance figure for seasonally adjusted initial claims was 241,000, a decrease of 19,000 from the previous week's revised level. The previous week's level was revised up by 2,000 from 258,000 to 260,000. The 4-week moving average was 236,250, an increase of 4,750 from the previous week's revised average. The previous week's average was revised up by 500 from 231,000 to 231,500.
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 increased to 236,250.

The previous week was revised up.

Weekly claims were below the consensus forecast. 

The increase over the last two weeks is partially hurricane related.

by Calculated Risk on 10/17/2024 08:38:00 AM

On a monthly basis, retail sales increased 0.4% from August to September (seasonally adjusted), and sales were up 1.7 percent from September 2023.

From the Census Bureau report:

Advance estimates of U.S. retail and food services sales for September 2024, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $714.4 billion, an increase of 0.4 percent from the previous month, and up 1.7 percent from September 2023. ... The July 2024 to August 2024 percent change was unrevised from up 0.1 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 0.6% 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 2.9% on a YoY basis.

The change in sales in September was above expectations, and sales in July and August were revised up, combined.

by Calculated Risk on 10/16/2024 07:37:00 PM

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

Thursday:
• At 8:30 AM ET, Retail sales for September will be released.  The consensus is for a 0.2% increase in retail sales.

• Also at 8:30 AM, The initial weekly unemployment claims report will be released. The consensus is for 265 thousand initial claims, up from 258 thousand last week.

• Also at 8:30 AM, the Philly Fed manufacturing survey for October. The consensus is for a reading of 3.0, up from 1.7.

• At 9:15 AM, The Fed will release Industrial Production and Capacity Utilization for September. The consensus is for a 0.1% decrease in Industrial Production, and for Capacity Utilization to decrease to 77.9%.

• At 10:00 AM, The October NAHB homebuilder survey. The consensus is for a reading of 42, up from 41 in September. Any number below 50 indicates that more builders view sales conditions as poor than good.

by Calculated Risk on 10/16/2024 02:49:00 PM

The following graph shows real GDP quarterly (blue, annualized), and the year-over-year change in GDP (red).

Click on graph for larger image.

The pandemic slump and subsequent economic recovery are cutoff and marked.  

In general, this is the rate of growth that we should expect, see: Demographics and GDP: 2% is the new 4%

by Calculated Risk on 10/16/2024 11:32:00 AM

Note: I've received a number of requests lately to post this again, so here is another update of tracking employment during Presidential terms.  We frequently use Presidential terms as time markers - we could use Speaker of the House, Fed Chair, or any other marker.

Important: There are many differences between these periods. Overall employment was smaller in the '80s, however the participation rate was increasing in the '80s (younger population and women joining the labor force), and the participation rate is generally declining now.  But these graphs give an overview of employment changes.

The first graph shows the change in private sector payroll jobs from when each president took office until the end of their term(s). Presidents Carter, George H.W. Bush, and Trump only served one term.

Mr. G.W. Bush (red) took office following the bursting of the stock market bubble and left during the bursting of the housing bubble. Mr. Obama (dark blue) took office during the financial crisis and great recession. There was also a significant recession in the early '80s right after Mr. Reagan (dark red) took office.

There was a recession towards the end of President G.H.W. Bush (light purple) term, and Mr. Clinton (light blue) served for eight years without a recession.   There was a pandemic related recession in 2020.

First, here is a table for private sector jobs. The previous top two private sector terms were both under President Clinton.  

Term	Private Sector Jobs Added (000s)
Biden	14,5561
Clinton 1	10,876
Clinton 2	10,094
Obama 2	9,926
Reagan 2	9,351
Carter	9,039
Reagan 1	5,363
Obama 1	1,907
GHW Bush	1,507
GW Bush 2	443
GW Bush 1	-820
Trump	-2,192
1After 44 months.

Click on graph for larger image.

The first graph is for private employment only.

Private sector employment increased by 9,039,000 under President Carter (dashed green), by 14,714,000 under President Reagan (dark red), 1,507,000 under President G.H.W. Bush (light purple), 20,970,000 under President Clinton (light blue), lost 377,000 under President G.W. Bush, and gained 11,833,000 under President Obama (dark dashed blue).  During Trump's term (Orange), the economy lost 2,135,000 private sector jobs.

In the first 44 months of President Biden's term (Blue), the economy has added 14,556,000 private sector jobs, with the initial growth as the economy recovered from the pandemic.

 A big difference between the presidencies has been public sector employment.  Note: the bumps in public sector employment due to the decennial Census in 1980, 1990, 2000, 2010 and 2020. 

The public sector grew during Mr. Carter's term (up 1,304,000), during Mr. Reagan's terms (up 1,414,000), during Mr. G.H.W. Bush's term (up 1,127,000), during Mr. Clinton's terms (up 1,934,000), and during Mr. G.W. Bush's terms (up 1,744,000 jobs).  However, the public sector declined significantly while Mr. Obama was in office (down 263,000 jobs).  During Trump's term, the economy lost 528,000 public sector jobs.

In the first 44 months of President Biden's term, the economy has added 1,633,000 public sector jobs (about 93% of public job growth has been for state and local governments, and about 55% for education).

And a table for public sector jobs. Public sector jobs increased have increased the most during Biden's term, ahead of the number during Reagan's 2nd term.  Public sector jobs declined the most during Obama's first term.

Term	Public Sector Jobs Added (000s)
Biden	1,6331
Reagan 2	1,438
Carter	1,304
Clinton 2	1,242
GHW Bush	1,127
GW Bush 1	900
GW Bush 2	844
Clinton 1	692
Obama 2	447
Reagan 1	-24
Trump	-528
Obama 1	-710
1After 44 months.

by Calculated Risk on 10/16/2024 07:00:00 AM

From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey

Mortgage applications decreased 17.0 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Applications Survey for the week ending October 11, 2024.

The Market Composite Index, a measure of mortgage loan application volume, decreased 17.0 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 17 percent compared with the previous week. The Refinance Index decreased 26 percent from the previous week and was 111 percent higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 7 percent from one week earlier. The unadjusted Purchase Index decreased 7 percent compared with the previous week and was 7 percent higher than the same week one year ago.

“Mortgage rates moved higher for the third consecutive week, with the 30-year fixed rate increasing to 6.52 percent, its highest level since August,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “The recent uptick in rates has put a damper on applications. Refinance applications fell 26 percent to their lowest level since August, with comparable drops in both conventional and government refinances. This pushed the refinance share of applications back below 50 percent for the first time in over a month. Furthermore, purchase applications also decreased but notably remain 7 percent higher than a year ago.”

Added Kan, “Demand is holding up to an extent for prospective first-time buyers. FHA purchase applications were little changed despite the increase in rates, as some first-time homebuyers remain in the market because of improving housing inventory conditions.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) increased to 6.52 percent from 6.36 percent, with points increasing to 0.65 from 0.62 (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 up 7% 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 about 8% below the lowest levels during the housing bust.  

The second graph shows the refinance index since 1990.

With higher mortgage rates, the refinance index increased significantly as mortgage rates declined last month but decreased over the last three weeks as rates increased.