by Calculated Risk on 10/30/2024 08:15:00 AM

From ADP: ADP National Employment Report: Private Sector Employment Increased by 233,000 Jobs in October; Annual Pay was Up 4.6%

– Private sector employment increased by 233,000 jobs in October and annual pay was up 4.6 percent year-over-year, according to the October ADP® National Employment ReportTM produced by the ADP Research Institute® in collaboration with the Stanford Digital Economy Lab (“Stanford Lab”). ...

“Even amid hurricane recovery, job growth was strong in October,” said Nela Richardson, chief economist, ADP. “As we round out the year, hiring in the U.S. is proving to be robust and broadly resilient.”
emphasis added

This was well above the consensus forecast of 110,000. The BLS report will be released Friday, and the consensus is for 140,000 non-farm payroll jobs added in October. Note: ADP doesn't include the Boeing strike, and probably was impacted less by the hurricanes than the BLS report.

by Calculated Risk on 10/30/2024 07:00:00 AM

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

Mortgage applications decreased 0.1 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Applications Survey for the week ending October 25, 2024.

The Market Composite Index, a measure of mortgage loan application volume, decreased 0.1 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 1 percent compared with the previous week. The Refinance Index decreased 6 percent from the previous week and was 84 percent higher than the same week one year ago. The seasonally adjusted Purchase Index increased 5 percent from one week earlier. The unadjusted Purchase Index increased 4 percent compared with the previous week and was 10 percent higher than the same week one year ago.

“Mortgage applications were essentially flat last week as rates increased for the fourth time in five weeks, driven by bond market volatility in advance of the presidential election and the next FOMC meeting. The 30-year fixed rate, at 6.73 percent, was at its highest level since July 2024,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “After a brief burst of activity in September when rates were almost 60 basis points lower, overall applications have declined 27 percent, driven by a pullback in refinances. Government refinances accounted for a large part of the decrease, dropping 12 percent over last week.”

Added Kan, “Purchase applications increased compared to a holiday-shortened week and were 10 percent higher than a year ago. While near-term purchase application activity has weakened, we continue to expect housing demand from younger homebuyers to support purchase growth over the next few years as for-sale inventory loosens gradually.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) increased to 6.73 percent from 6.52 percent, with points increasing to 0.69 from 0.64 (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 10% 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 9% 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 five weeks as rates moved back up.

by Calculated Risk on 10/29/2024 08:03:00 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.

• 8:15 AM, The ADP Employment Report for October. This report is for private payrolls only (no government).  The consensus is for 108,000 jobs added, down from 143,000 in September.

• 8:30 AM, Gross Domestic Product, 3rd quarter 2024 (advance estimate). The consensus is that real GDP increased 3.0% annualized in Q3, unchanged from 3.0% in Q2.

• 10:00 AM, Pending Home Sales Index for September. The consensus is 1.0% decrease in the index.

by Calculated Risk on 10/29/2024 05:30:00 PM

The Census Bureau released the Residential Vacancies and Homeownership report for Q3 2024 today.

The results of this survey were significantly distorted by the pandemic in 2020.

This report is frequently mentioned by analysts and the media to track household formation, the homeownership rate, and the homeowner and rental vacancy rates.  However, there are serious questions about the accuracy of this survey.

This survey might show the trend, but I wouldn't rely on the absolute numbers. Analysts probably shouldn't use the HVS to estimate the excess vacant supply or household formation, or rely on the homeownership rate, except as a guide to the trend.

National vacancy rates in the third quarter 2024 were 6.9 percent for rental housing and 1.0 percent for homeowner housing. The rental vacancy rate was not statistically different from the rate in the third quarter 2023 (6.6 percent) and not statistically different from the rate in the second quarter 2024 (6.6 percent).

The homeowner vacancy rate of 1.0 percent was higher than the rate in the third quarter 2023 (0.8 percent) and not statistically different from the rate in the second quarter 2024 (0.9 percent).

The homeownership rate of 65.6 percent was not statistically different from the rate in the third quarter 2023 (66.0 percent) and virtually the same as the rate in the second quarter 2024 (65.6 percent).
emphasis added

Click on graph for larger image.

The Red dots are the decennial Census homeownership rates for April 1st, 1990, 2000, 2010, and 2020. 

The HVS homeownership rate was unchanged at 65.6% in Q3, from 65.6% in Q2.  

The results in Q2 and Q3 2020 were distorted by the pandemic and should be ignored.

The HVS homeowner vacancy increased to 1.0% in Q3 from 0.9% in Q2.

Once again - this probably shows the general trend, but I wouldn't rely on the absolute numbers.

The homeowner vacancy rate declined sharply during the pandemic and includes homes that are vacant and for sale (so this mirrors the low but increasing levels of existing home inventory).

The rental vacancy rate was increased to 6.9% in Q3 from 6.6% in Q2.  This is up from the low of 5.6% in 2021 and 2022.

The quarterly HVS is the timeliest survey on households, but there are many questions about the accuracy of this survey.

by Calculated Risk on 10/29/2024 01:55:00 PM

Today, in the Calculated Risk Real Estate Newsletter: Lawler: Mortgage Rates Have Surged Since the Federal Reserve Cut Interest Rates Last Month

Excerpt:

From housing economist Tom Lawler:

Folks who expected that mortgages rates would decline when the Federal Reserve began cutting its federal funds rate target range have been dazed and confused over the last month and a half.  Since the day before the Fed’s 50 bp reduction in its funds rate target on September 18, 30-year MBS yields have surged by 84 to 96 bp, while mortgage rates have jumped by 72 to 89 bp.   At the same time intermediate- and longer-term Treasury yields have risen 53 to 67 bp.

There are two main reasons MBS and mortgage rates have risen by more than Treasury rates over this period.  First, implied interest rate volatility has surged, as many market participants were caught off-guard by the string of unexpectedly strong economic releases (and slightly higher inflation releases) following the Fed’s rate decision.  For example, the BofAML MOVE index, a measure if implied interest rate volatility derived from one-month options on Treasuries across the yield curve, increased from 101.58 on September 17 to 130.92 on October 28, its highest reading since October 30, 2023.  (Mortgage investors effectively write a prepayment option to home borrowers, and as such higher implied interest rate volatility increases the premium over Treasuries that investors require to compensate them for prepayment risk.)

And second, MBS option-adjusted spreads, which were at the low-end of the “no Fed MBS intervention” range just prior to the Fed’s action, have since moved higher.

There is much more in the article.

by Calculated Risk on 10/29/2024 10:17:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Case-Shiller: National House Price Index Up 4.2% year-over-year in August

Excerpt:

S&P/Case-Shiller released the monthly Home Price Indices for August ("August" is a 3-month average of June, July and August closing prices). August closing prices include some contracts signed in April, so there is a significant lag to this data. Here is a graph of the month-over-month (MoM) change in the Case-Shiller National Index Seasonally Adjusted (SA).

The MoM increase in the seasonally adjusted (SA) Case-Shiller National Index was at 0.32% (a 4.0% annual rate), This was the nineteenth consecutive MoM increase in the seasonally adjusted index.

On a seasonally adjusted basis, prices increased month-to-month in 18 of the 20 Case-Shiller cities (prices declined in Tampa and Miami). Seasonally adjusted, San Francisco has fallen 6.8% from the recent peak, Phoenix is down 4.3% from the peak, Portland down 2.7%, and Denver down 2.6%.

There is much more in the article.

by Calculated Risk on 10/29/2024 10:00:00 AM

From the BLS: Job Openings and Labor Turnover Summary

The number of job openings was little changed at 7.4 million on the last business day of September, the U.S. Bureau of Labor Statistics reported today. Over the month, hires changed little at 5.6 million. The number of total separations was unchanged at 5.2 million. Within separations, quits (3.1 million) and layoffs and discharges (1.8 million) changed little.
emphasis added

The following graph shows job openings (black line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

This series started in December 2000.

Note: The difference between JOLTS hires and separations is similar to the CES (payroll survey) net jobs headline numbers. This report is for September; the employment report this Friday will be for October.

Click on graph for larger image.

Note that hires (dark blue) and total separations (red and light blue columns stacked) are usually pretty close each month. This is a measure of labor market turnover.  When the blue line is above the two stacked columns, the economy is adding net jobs - when it is below the columns, the economy is losing jobs.

The spike in layoffs and discharges in March 2020 is labeled, but off the chart to better show the usual data.

Jobs openings decreased in September to 7.44 million from 7.86 million in August.

The number of job openings (black) were down 20% year-over-year. 

Quits were down 15% year-over-year. These are voluntary separations. (See light blue columns at bottom of graph for trend for "quits").

by Calculated Risk on 10/29/2024 09:00:00 AM

S&P/Case-Shiller released the monthly Home Price Indices for August ("August" is a 3-month average of June, July and August closing prices).

This release includes prices for 20 individual cities, two composite indices (for 10 cities and 20 cities) and the monthly National index.

From S&P S&P CoreLogic Case-Shiller Index Records 4.2% Annual Gain in August 2024

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 4.2% annual return for August, down from a 4.8% annual gain in the previous month. The 10-City Composite saw an annual increase of 6.0%, down from a 6.8% annual increase in the previous month. The 20-City Composite posted a year-over-year increase of 5.2%, dropping from a 5.9% increase in the previous month. New York again reported the highest annual gain among the 20 cities with an 8.1% increase in August, followed by Las Vegas and Chicago with annual increases of 7.3% and 7.2%, respectively. Denver posted the smallest year-over-year growth of 0.7%.
...
The pre-seasonally adjusted U.S. National Index, 20-City Composite, and 10-City Composite upward trends reversed in August, with a -0.1% drop for the national index, and the 20-City and 10-City Composites saw -0.3% and -0.4% returns for this month, respectively.

After seasonal adjustment, the U.S. National Index posted a month-over-month increase of 0.3%, while the 20-City and 10-City Composite reported a monthly rise of 0.4% and 0.3%, respectively.

“Home price growth is beginning to show signs of strain, recording the slowest annual gain since mortgage rates peaked in 2023,” says Brian D. Luke, CFA, Head of Commodities, Real & Digital Assets. “As students went back to school, home price shoppers appeared less willing to push the index higher than in the summer months. Prices continue to decelerate for the past six months, pushing appreciation rates below their long-run average of 4.8%. After smoothing for seasonality in the data, home prices continued to reach all-time highs, for the 15th month in a row.

“Regionally, all markets continue to remain positive, barely,” Luke continued. “Denver posted the slowest annual gain of all markets this year, dropping below Portland for the first time since the spring. The Northeast remains the best performing region, with the strongest gains for over a year. Currently, only New York, Las Vegas, and Chicago markets are at an all-time high. Comparing average gains of traditional red and blue states highlight a slight advantage for home price markets of blue states. With stronger gains in the Northeast and West than the South, blue states have outperformed red states dating back to July 2023.”
emphasis added

Click on graph for larger image.

The first graph shows the nominal seasonally adjusted Composite 10, Composite 20 and National indices (the Composite 20 was started in January 2000).

The Composite 10 index was up 0.3% in August (SA).  The Composite 20 index was up 0.4% (SA) in August.

The National index was up 0.3% (SA) in August.

The second graph shows the year-over-year change in all three indices.

The Composite 10 SA was up 6.0% year-over-year.  The Composite 20 SA was up 5.2% year-over-year.

The National index SA was up 4.2% year-over-year.

Annual price changes were close to expectations.  I'll have more later.

by Calculated Risk on 10/28/2024 07:19:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Back to 7%

It's no mystery that mortgage rates have had a terrible October. As of last Friday, the average lender's top tier 30yr fixed rates were up to 6.90--an increase of more than 0.625% this month. Today's 0.10% increase brings the rate index up to 7.0% exactly which is the highest we've seen since July 10th.
...
This week sees the return of highly relevant economic data with Friday's jobs report being the most important, by far. Each of the past two jobs reports has had a huge impact on rates due to wide deviations from expectations. If Friday's report is anywhere nearly as surprising, the impact on rates should play out on a similar scale. [30 year fixed 7.00%]
emphasis added

Tuesday:
• At 9:00 AM ET, S&P/Case-Shiller House Price Index for August.  The consensus is for the Composite 20 index to be up 6.0% year-over-year.

• Also at 9:00 AM, FHFA House Price Index for August. This was originally a GSE only repeat sales, however there is also an expanded index.

• At 10:00 AM, Job Openings and Labor Turnover Survey for September from the BLS.

• Also at 10:00 AM, The Q3 Housing Vacancies and Homeownership report from the Census Bureau.

by Calculated Risk on 10/28/2024 04:04:00 PM

The October employment report will be released on Friday. The consensus is for 120,000 jobs added, and for the unemployment rate to be unchanged at 4.1%. 

Analysts are trying to estimate the distortion from Hurrican Milton.  In September 2005, the initial BLS report showed a loss of 35 thousand jobs due to the impact of Hurricanes Katrina and Rita (Katrina hit in late August, and Rita during the reference period in September).  This was eventually revised to a gain of 57 thousand (still well below the average for the year of 210 thousand per month.  Milton also made landfall during the reference period, so the BLS will try to adjust for impact.

The BLS released the strike report on Friday, and that showed a loss of 41 thousand jobs due to strikes (mostly Boeing).

From Goldman Sachs:

We expect payroll growth of 95k in October (vs. 186k 3-month average) because Big Data measures point to slower job growth, we estimate the hurricanes will subtract 40-50k this month, and the Bureau of Labor Statistics reported that strikes will exert a 41k drag. These drags should have less impact on ADP employment, which we expect to rise 115k in October.

We forecast an unchanged 4.1% unemployment rate.

From BofA:

We forecast nonfarm payrolls rose by 100k in October. Although this is below consensus, we’d still view it as a solid print, since we estimate that Hurricane Milton and the Boeing strike lowered payrolls by about 50k. ... Meanwhile, the unemployment rate should move back up to 4.2%, partly due in part to hurricane distortions.