by Calculated Risk on 10/23/2024 07:00:00 AM

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

Mortgage applications decreased 6.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Applications Survey for the week ending October 18, 2024.

The Market Composite Index, a measure of mortgage loan application volume, decreased 6.7 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 7 percent compared with the previous week. The Refinance Index decreased 8 percent from the previous week and was 90 percent higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 5 percent from one week earlier. The unadjusted Purchase Index decreased 5 percent compared with the previous week and was 3 percent higher than the same week one year ago.

“Mortgage rates saw mixed results last week, but the 30-year fixed rate remained unchanged at 6.52 percent. Application activity decreased to its lowest level since July, as both purchase and refinance applications saw declines,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Purchase applications continued to run stronger than last year’s pace for the fifth consecutive week. Even though rates have been on a recent upswing, they are over a full percentage point lower than a year ago, which has kept some homebuyers in the market. For-sale inventory has started to loosen, and home-price growth has eased in some markets, providing more options for buyers in combination with these lower rates.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) remained unchanged at 6.52 percent, with points decreasing to 0.64 from 0.65 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate remained unchanged from last week.
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 3% year-over-year unadjusted. 

Red is a four-week average (blue is weekly).  

Purchase application activity is up about 5% from the lows in late October 2023, but still about 13% 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 four weeks as rates increased.

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.