by Calculated Risk on 10/30/2024 08:05:00 PM

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

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released. The consensus is for 230 thousand initial claims, up from 227 thousand last week.

• Also at 8:30 AM, Personal Income and Outlays for September. The consensus is for a 0.4% increase in personal income, and for a 0.4% increase in personal spending. And for the Core PCE price index to increase 0.3%. PCE prices are expected to be up 2.1% YoY, and core PCE prices up 2.6% YoY.

• At 9:45 AM, Chicago Purchasing Managers Index for October. The consensus is for a reading of 46.0, down from 46.6 in September.

by Calculated Risk on 10/30/2024 12:38:00 PM

Today, in the Calculated Risk Real Estate Newsletter: Fannie and Freddie: Single Family and Multi-Family Serious Delinquency Rates Increased in September

Excerpt:

Single-family serious delinquencies increased slightly in September, and multi-family serious delinquencies increased.

Freddie Mac reported that the Single-Family serious delinquency rate in September was 0.54%, up from 0.52% August. Freddie's rate is down slightly year-over-year from 0.55% in September 2023.  This is below the pre-pandemic lows.

Freddie's serious delinquency rate peaked in February 2010 at 4.20% following the housing bubble and peaked at 3.17% in August 2020 during the pandemic.Fannie Mae reported that the Single-Family serious delinquency rate in September was 0.52%, up from 0.50% in August. The serious delinquency rate is down year-over-year from 0.54% in September 2023.  This is also below the pre-pandemic lows.

The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59% following the housing bubble and peaked at 3.32% in August 2020 during the pandemic.

There is much more in the article.

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

From the NAR: Pending Home Sales Advanced 7.4% in September

ending home sales rose in September, according to the National Association of REALTORS®. All four major regions experienced month-over-month gains in transactions. Year-over-year, the Northeast and West registered increases while sales remained steady in the Midwest and South.

The Pending Home Sales Index (PHSI)* – a forward-looking indicator of home sales based on contract signings – jumped 7.4% to 75.8 in September, the highest level since March (78.3). Year-over-year, pending transactions ascended 2.6%. An index of 100 is equal to the level of contract activity in 2001.

“Contract signings rose across all regions of the country as buyers took advantage of the combination of lower mortgage rates in late summer and more inventory choices,” said NAR Chief Economist Lawrence Yun. “Further gains are expected if the economy continues to add jobs, inventory levels grow, and mortgage rates hold steady.”
...
The Northeast PHSI expanded 6.5% from last month to 65.6, up 3.3% from September 2023. The Midwest index surged 7.1% to 75.0 in September, identical to the previous year.

The South PHSI improved 6.7% to 89.0 in September, unchanged from a year ago. The West index ballooned by 9.8% from the prior month to 64.0, up 12.3% from September 2023.
emphasis added

This was well above expectations. Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in October and November. The NAR also included their forecast:

In the next two years, Yun foresees slower home price appreciation and corresponding increases in sales.

“After two years of sluggish home sales in 2023 and 2024, existing-home sales are forecasted to rise to 4.47 million in 2025 and more than 5 million in 2026,” Yun said. “During the next two years, expect a slower rate of growth in home prices that’s roughly in line with the consumer price index because of additional supply reaching the market.”

Yun predicts the median existing-home price will rise to $410,700 in 2025 and to $420,000 in 2026. The annual 30-year fixed mortgage rate will slide to 5.9% in 2025 but then move higher to 6.1% in 2026

.

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

From the BEA: Gross Domestic Product, Third Quarter 2024 (Advance Estimate)

Real gross domestic product (GDP) increased at an annual rate of 2.8 percent in the third quarter of 2024, according to the "advance" estimate released by the U.S. Bureau of Economic Analysis. In the second quarter, real GDP increased 3.0 percent.
...
The increase in real GDP primarily reflected increases in consumer spending, exports, and federal government spending. Imports, which are a subtraction in the calculation of GDP, increased.

The increase in consumer spending reflected increases in both goods and services. Within goods, the leading contributors were other nondurable goods (led by prescription drugs) and motor vehicles and parts. Within services, the leading contributors were health care (led by outpatient services) as well as food services and accommodations. The increase in exports primarily reflected an increase in goods (led by capital goods, excluding automotive). The increase in federal government spending was led by defense spending. The increase in imports primarily reflected an increase in goods (led by capital goods, excluding automotive).

Compared to the second quarter, the deceleration in real GDP in the third quarter primarily reflected a downturn in private inventory investment and a larger decrease in residential fixed investment. These movements were partly offset by accelerations in exports, consumer spending, and federal government spending. Imports accelerated.
emphasis added

PCE increased at a 3.7% annual rate, and residential investment decreased at a 5.1% rate. The advance Q2 GDP report, with 2.8% annualized increase, was below expectations.

I'll have more later ...

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.