by Calculated Risk on 10/22/2024 07:01:00 PM

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

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

• At 10:00 AM, Existing Home Sales for September from the National Association of Realtors (NAR). The consensus is for 3.89 million SAAR, up from 3.86 million in August.

• At During the day, The AIA/Deltek's Architecture Billings Index for September (a leading indicator for commercial real estate).

• At 2:00 PM, the Federal Reserve Beige Book, an informal review by the Federal Reserve Banks of current economic conditions in their Districts.

by Calculated Risk on 10/22/2024 11:46:00 AM

Every year I track seasonal retail hiring for hints about holiday retail sales.  At the bottom of this post is a graph showing the correlation between October seasonal hiring and holiday retail sales.

Here is a graph of retail hiring for previous years based on the BLS employment report:

Click on graph for larger image.

This graph shows the historical net retail jobs added for October, November and December by year.

Retailers hired 574 thousand seasonal workers last year (using BLS data, Not Seasonally Adjusted), and 156 thousand seasonal workers last October.

Note that in the early '90s, retailers started hiring seasonal workers earlier - and the trend towards hiring earlier has continued.

The following scatter graph is for the years 2005 through 2023 and compares October retail hiring with the real increase (inflation adjusted) for retail sales (Q4 over previous Q4).

In general October hiring is a pretty good indicator of seasonal sales. R-square is 0.72 for this small sample. Note: This uses retail sales in Q4, and excludes autos, gasoline and restaurants. 

NOTE: The dot in the upper right - with real Retail sales up over 10% YoY is for 2020 - when retail sales soared due to the pandemic spending on goods (service spending was soft).

When the October employment report is released on Friday, November 1st, I'll be looking at seasonal retail hiring for hints on what the retailers actually expect for the holiday season.

by Calculated Risk on 10/22/2024 08:39:00 AM

Today, in the CalculatedRisk Real Estate Newsletter: California Home Sales Up 5% SA YoY in September

Excerpt:

The National Association of Realtors (NAR) is scheduled to release September Existing Home Sales on Wednesday, October 23rd at 10 AM ET. The consensus is for 3.89 million SAAR, up from 3.86 million in August.

Housing economist Tom Lawler estimates the NAR will report September sales of 3.83 million SAAR. The cycle low was 3.85 million SAAR in October 2023.
...
Here is the press release from the California Association of Realtors® (C.A.R.): California housing demand drops in September as buyers remain hesitant amid falling mortgage rates, C.A.R. reports

September’s sales pace decreased 3.4 percent from the 262,050 homes sold in August and was up 5.1 percent from a year ago, when a revised 240,840 homes were sold on an annualized basis. The sales pace has remained below the 300,000-threshold for the past two years, while year-to-date home sales edged up 0.9 percent from the first nine months of 2023.

There is much more in the article.

by Calculated Risk on 10/21/2024 07:53:00 PM

From Matthew Graham at Mortgage News Daily: Rates Jump Quickly to Highest Levels Since July

By the smallest of margins, mortgage rates are back up to levels last seen in July. That means we've gone from being fairly close to 6% in mid-September to being nearly as close to 7% today when it comes to top tier 30yr fixed scenarios for the average lender.

Today's jump was particularly quick and frustratingly lacking in satisfying explanations. It's not the explanations make bad news any more palatable, but it's always more frustrating to be confronted with unpleasantness that seems to be happening for no good reason. [30 year fixed 6.82%]
emphasis added

Tuesday:
• At 10:00 AM ET, Richmond Fed Survey of Manufacturing Activity for October.

• Also at 10:00 AM, State Employment and Unemployment (Monthly) for September 2024

by Calculated Risk on 10/21/2024 04:51:00 PM

From the MBA: Share of Mortgage Loans in Forbearance Increases to 0.34% in September

The Mortgage Bankers Association’s (MBA) monthly Loan Monitoring Survey revealed that the total number of loans now in forbearance increased to 0.34% as of September 30, 2024. According to MBA’s estimate, 170,000 homeowners are in forbearance plans. Mortgage servicers have provided forbearance to approximately 8.3 million borrowers since March 2020.

The share of Fannie Mae and Freddie Mac loans in forbearance remained the same as the previous month at 0.13% in September 2024. Ginnie Mae loans in forbearance increased by 10 basis points to 0.76%, and the forbearance share for portfolio loans and private-label securities (PLS) increased 2 basis points to 0.37%.

“The percentage of loans in forbearance increased for the fourth consecutive month,” said Marina Walsh, CMB, MBA’s Vice President of Industry Analysis. “Since May 2024, Ginnie Mae loans in forbearance increased by almost 40 basis points, compared to six basis points for portfolio and PLS loans and three basis points for Fannie and Freddie loans.”

Added Walsh, “We are seeing some weakening in loan performance, particularly among government products. Overall government loan performance reached a new low for the year in September. In addition, the share of government post-forbearance workouts that are current dropped considerably over the past four months. These trends indicate that some homeowners are exhibiting signs of distress – whether because of economic hardships, natural disasters, or other reasons.”
emphasis added

At the end of August, there were about 170,000 homeowners in forbearance plans.

by Calculated Risk on 10/21/2024 01:59:00 PM

After the election in November 2016, I wrote The Future is still Bright! and The Cupboard is Full. I pointed out that there were many tailwinds for the economy (heading into 2017) and that most of Mr. Trump's proposals probably wouldn't happen like repealing the ACA or deporting 10+ million people. However, as expected, Trump did cut taxes on high income earners.

I also noted in 2016: "The general rule is don't invest based on your political views, however it is also important to look at the impact of specific policies."

For the upcoming election, most key economists and analysts (Goldman Sachs, Moody's and more) believe the economy will perform better under Harris than Trump.  I agree.  If Harris is elected, the economy will mostly continue on the current path and the US economy is the envy of the world (a better recovery from the pandemic than most other countries).  There is always more to do, but the US has done better than most.

However, I doubt I will be as sanguine as I was in 2016 if Mr. Trump is elected again.  

Although Trump is lazy and incoherent regarding policy (everything is always 2 weeks away - aka "Free beer tomorrow"), he is making many of the same promises again (repeal ACA, deport 20+ million people, cut taxes on the wealthy, raise taxes on lower- and middle-income earners via tariffs).  Some of those promises might happen and have a negative impact on the economy.

I'll write more on the economic outlook after the election.

by Calculated Risk on 10/21/2024 11:00:00 AM

Today, in the CalculatedRisk Real Estate Newsletter: NMHC on Apartments: "Looser market conditions for the ninth consecutive quarter"

Excerpt:

From the NMHC: Though the Apartment Market Continues to Loosen, Deal Flow Increases for Third Consecutive Quarter as Debt and Equity Conditions Improve

Apartment market conditions showed signs of improvement in the National Multifamily Housing Council’s (NMHC’s) October 2024 Quarterly Survey of Apartment Market Conditions. All but the Market Tightness (37) index indicated more favorable conditions this quarter, with Sales Volume (67), Equity Financing (63) and Debt Financing (77) all coming in above the breakeven level (50)
...
• The Market Tightness Index came in at 37 this quarter – below the breakeven level of 50 – indicating looser market conditions for the ninth consecutive quarter. While close to half of respondents (46%) thought market conditions were unchanged relative to three months ago, 40% of respondents thought markets have become looser, up from 27% in July. Fifteen percent of respondents reported tighter markets than three months ago.

This index has been an excellent leading indicator for rents and vacancy rates, and this suggests higher vacancy rates and a further weakness in asking rents. This is the ninth consecutive quarter with looser conditions than the previous quarter.

There is much more in the article.

by Calculated Risk on 10/21/2024 08:11:00 AM

Altos reports that active single-family inventory was up 1.0% week-over-week. Inventory is now up 49.7% from the February seasonal bottom.  

The first graph shows the seasonal pattern for active single-family inventory since 2015.

Click on graph for larger image.

The red line is for 2024.  The black line is for 2019.  

Inventory was up 33.4% compared to the same week in 2023 (last week it was up 34.0%), and down 21.0% compared to the same week in 2019 (last week it was down 22.6%). 

Back in June 2023, inventory was down almost 54% compared to 2019, so the gap to more normal inventory levels is closing.

This second inventory graph is courtesy of Altos Research.

As of October 18th, inventory was at 739 thousand (7-day average), compared to 732 thousand the prior week. 

Mike Simonsen discusses this data regularly on Youtube.

by Calculated Risk on 10/20/2024 06:20:00 PM

Weekend:
• Schedule for Week of October 20, 2024

Monday:
• No major economic releases scheduled.

From CNBC: Pre-Market Data and Bloomberg futures S&P 500 are up 4 and DOW futures are up 12 (fair value).

Oil prices were down over the last week with WTI futures at $69.22 per barrel and Brent at $73.06 per barrel. A year ago, WTI was at $89, and Brent was at $96 - so WTI oil prices are down about 22% 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 $3.52 per gallon, so gasoline prices are down $0.39 year-over-year.

by Calculated Risk on 10/20/2024 09:50:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Lawler: Update on the “Neutral” Rate and Early Read on September Existing Home Sales

A brief excerpt:

From housing economist Tom Lawler:

Early Read on Existing Home Sales in September

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 3.83 million in September, down 0.8% from August’s preliminary pace and down 3.8% from last September’s seasonally adjusted pace.

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 on September sales: The National Association of Realtors (NAR) is scheduled to release September Existing Home Sales on Wednesday, October 23rd at 10 AM ET. The consensus is for 3.89 million SAAR, up from 3.86 million in August. The cycle low was 3.85 million SAAR in October 2023.

Update on the “Neutral” Rate

Executive Summary: Estimates of the “neutral” real interest rate are all over the map.  Based on an assessment of various measures, my best is that the neutral real interest rate in the US is between 1 ¾% to 2%.  One of course needs to add inflation/inflation expectations to that range.  If/when the Fed were to achieve its 2% inflation target, then the neutral nominal interest rate would be 3 ¾% to 4%.

There is much more in the article.