by Calculated Risk on 11/05/2024 10:00:00 AM

(Posted with permission). The ISM® Services index was at 56.0%, up from 54.9% last month. The employment index increased to 53.0%, from 48.1%. Note: Above 50 indicates expansion, below 50 in contraction.

From the Institute for Supply Management: Services PMI® at 56% October 2024 Services ISM® Report On Business®

Economic activity in the services sector expanded for the fourth consecutive month in October, say the nation's purchasing and supply executives in the latest Services ISM® Report On Business®. The Services PMI® registered 56 percent, which is the highest reading since July 2022 and indicates sector expansion for the 50th time in 53 months.

The report was issued today by Steve Miller, CPSM, CSCP, Chair of the Institute for Supply Management® (ISM®) Services Business Survey Committee: “In October, the Services PMI® registered 56 percent, 1.1 percentage points higher than September’s figure of 54.9 percent. The reading in October marked the eighth time the composite index has been in expansion territory this year. The Business Activity Index registered 57.2 percent in October, 2.7 percentage points lower than the 59.9 percent recorded in September, indicating a fourth month of expansion after a contraction in June. The New Orders Index decreased to 57.4 percent in October, 2 percentage points lower than September’s figure of 59.4 percent. The Employment Index landed in expansion territory for its third time in four months; the reading of 53 percent is a 4.9-percentage point increase compared to the 48.1 percent recorded in September.
emphasis added

The PMI was well above expectations.

by Calculated Risk on 11/05/2024 08:30:00 AM

The Census Bureau and the Bureau of Economic Analysis reported:

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced today that the goods and services deficit was $84.4 billion in September, up $13.6 billion from $70.8 billion in August, revised.

September exports were $267.9 billion, $3.2 billion less than August exports. September imports were $352.3 billion, $10.3 billion more than August imports
emphasis added

Click on graph for larger image.

Exports decreased and imports increased in September.

Exports are up 2.4% year-over-year; imports are up 8.8% year-over-year.

Both imports and exports decreased sharply due to COVID-19 and then bounced back - imports and exports have generally increased recently.

The second graph shows the U.S. trade deficit, with and without petroleum.

The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

Note that net, exports of petroleum products are positive and have been increasing.

The trade deficit with China increased to $31.8 billion from $28.4 billion a year ago.

It is possible some importers are trying to beat potential tariffs.

by Calculated Risk on 11/04/2024 06:38:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Start Week Slightly Lower as Election Volatility Works Both Ways

Love it or hate it, election-related volatility has been having a big impact on the bond market and, thus, mortgage rates.
...
Mortgage rates didn't react in an extreme fashion, but the average lender moved back down toward 7% for a top tier conventional 30yr fixed scenario. The same scenario was closer to 7.125% late last week. [30 year fixed 7.05%]
emphasis added

Tuesday:
• U.S. Election

• At 8:30 AM ET, Trade Balance report for September from the Census Bureau.  The consensus is for the deficit to be $73.5 billion in September, from $70.4 billion in August.

• At 10:00 AM, the ISM Services Index for October.  The consensus is for a decrease to 53.3 from 54.9.

by Calculated Risk on 11/04/2024 02:06:00 PM

This was released on Friday. From the Census Bureau reported that overall construction spending decreased:

Construction spending during September 2024 was estimated at a seasonally adjusted annual rate of $2,148.8 billion, 0.1 percent above the revised August estimate of $2,146.0 billion. The September figure is 4.6 percent above the September 2023 estimate of $2,055.2 billion.
emphasis added

Private spending was unchanged and public spending increased:

Spending on private construction was at a seasonally adjusted annual rate of $1,653.6 billion, virtually unchanged from the revised August estimate of $1,653.2 billion. ...

In September, the estimated seasonally adjusted annual rate of public construction spending was $495.2 billion, 0.5 percent above the revised August estimate of $492.9 billion.

Click on graph for larger image.

This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted.

Residential (red) spending is 6.8% below the peak in 2022.

Non-residential (blue) spending is 0.8% below the peak in June 2024.

Public construction spending is at the peak.

The second graph shows the year-over-year change in construction spending.

On a year-over-year basis, private residential construction spending is up 4.1%. Non-residential spending is up 3.5% year-over-year. Public spending is up 7.0% year-over-year.

This was close to consensus expectations of no change in spending. 

by Calculated Risk on 11/04/2024 10:51:00 AM

Today, in the Real Estate Newsletter: ICE Mortgage Monitor: "Annual home price growth cooled for the seventh consecutive month"

Brief excerpt:

One of the key metrics to watch for mortgage stress is early-stage delinquencies. These are borrowers that are delinquent within 6 months of origination. This was one of the obvious warning signs during the housing bubble.

There has been a steady increase in early-stage delinquencies for VA loans.

• Early-stage delinquencies – borrowers already past due six months after origination – have been gradually rising as well, most notably among VA originations

• Overall, 1.7% of 2024 vintage originations have been delinquent six months after origination, the highest share for any vintage since 2008 – outside of pandemic-era payment shocks

Note that national mortgage performance is being impacted by the hurricanes.

There is much more in the newsletter.

by Calculated Risk on 11/04/2024 08:11:00 AM

Altos reports that active single-family inventory was unchanged week-over-week.

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 29.8% compared to the same week in 2023 (last week it was up 30.8%), and down 19.4% compared to the same week in 2019 (last week it was down 20.7%). 

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

This second inventory graph is courtesy of Altos Research.

As of Nov 1st, inventory was at 736 thousand (7-day average), compared to 736 thousand the prior week. 

Mike Simonsen discusses this data regularly on Youtube.

by Calculated Risk on 11/03/2024 08:19:00 PM

Weekend:
• Schedule for Week of November 3, 2024

Monday:
• No major economic releases scheduled.

From CNBC: Pre-Market Data and Bloomberg futures S&P 500 are down 8 and DOW futures are down 168 (fair value).

Oil prices were down over the last week with WTI futures at $69.49 per barrel and Brent at $71.10 per barrel. A year ago, WTI was at $81, and Brent was at $88 - so WTI oil prices are down about 14% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $3.06 per gallon. A year ago, prices were at $3.40 per gallon, so gasoline prices are down $0.34 year-over-year.

by Calculated Risk on 11/03/2024 09:59:00 AM

Most analysts expect the FOMC will cut the federal funds rate at the meeting this week by 25bp lowering the target range to 4 1/2 to 4 3/4 percent.   

Currently almost all market participants are expecting a 25bp cut this week.  Market participants are also pricing in another 25bp cut in December.

From BofA:

We expect the Fed to cut rates by 25bp in November. ... Chair Powell’s message in the press conference should remain optimistic, particularly given the recent robust data flow. Powell is likely to emphasize data dependence once again, and provide little forward guidance about the policy path.
emphasis added

From Goldman:

We continue to expect the FOMC to lower the fed funds rate by 25bp at the November and December meetings.

Projections will NOT be released at this meeting. For review, here are the September projections. 

Since the last projections were released, economic growth has been above expectations, the unemployment rate is below expectations, and somewhat inflation lower than expected (although there are some "base effects" that might push PCE inflation up in Q4).  

The FOMC will look through the employment report released Friday because of the impact of hurricanes and the Boeing strike on job gains in October.

The BEA's second estimate for Q3 GDP showed real growth at 2.8% annualized, following 3.0% annualized real growth in Q2, and 1.6% in Q1.  Current estimates for Q4 GDP are around 2.6%.  That would put real growth in 2024, Q4 over Q4, at 2.5% - well above the top end of the September FOMC projections.  

GDP projections of Federal Reserve Governors and Reserve Bank presidents, Change in Real GDP1
Projection Date	2024	2025	2026	2027
Sept 2024	1.9 to 2.1	1.8 to 2.2	1.9 to 2.3	1.8 to 2.1
June 2024	1.9 to 2.3	1.8 to 2.2	1.8 to 2.1	---

¹ Projections of change in real GDP and inflation are from the fourth quarter of the previous year to the fourth quarter of the year indicated.

The unemployment rate was at 4.1% in October.  This is below the low end of the September projections.

Unemployment projections of Federal Reserve Governors and Reserve Bank presidents, Unemployment Rate2
Projection Date	2024	2025	2026	2027
Sept 2024	4.3 to 4.4	4.2 to 4.5	4.0 to 4.4	4.0 to 4.4
June 2024	3.9 to 4.2	3.9 to 4.3	3.9 to 4.3	---

² Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated.

As of September 2024, PCE inflation increased 2.1 percent year-over-year (YoY). This is below the low end of the September projections.

Inflation projections of Federal Reserve Governors and Reserve Bank presidents, PCE Inflation1
Projection Date	2024	2025	2026	2027
Sept 2024	2.2 to 2.4	2.1 to 2.2	2.0	2.0
June 2024	2.5 to 2.9	2.2 to 2.4	2.0 to 2.1	---

PCE core inflation increased 2.7 percent YoY in September. This is in the range of FOMC projections for Q4.

Core Inflation projections of Federal Reserve Governors and Reserve Bank presidents, Core Inflation1
Projection Date	2024	2025	2026	2027
Sept 2024	2.6 to 2.7	2.1 to 2.3	2.0	2.0
June 2024	2.8 to 3.0	2.3 to 2.4	2.0 to 2.1	---

by Calculated Risk on 11/03/2024 07:11:00 AM

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

For deaths, I'm currently using 4 weeks ago for "now", since the most recent three weeks will be revised significantly.

Note: "Effective May 1, 2024, hospitals are no longer required to report COVID-19 hospital admissions, hospital capacity, or hospital occupancy data."  So I'm no longer tracking hospitalizations.

COVID Metrics
	Now	Week Ago	Goal
Deaths per Week	905	985	≤3501
1my goals to stop weekly posts, 🚩 Increasing number weekly for Deaths ✅ Goal met.

Click on graph for larger image.

This graph shows the weekly (columns) number of deaths reported.

Although weekly deaths met the original goal to stop posting, I'm continuing to post now that deaths are above the goal again.  

Weekly deaths are triple the low of 302 in early June but are now declining and will likely continue to decline based on wastewater sampling.

And here is a graph I'm following concerning COVID in wastewater as of October 31st:

This appears to be a leading indicator for COVID hospitalizations and deaths.

COVID in wastewater is declining - only about 50% higher than the lows of last May - suggesting weekly deaths will continue to decline.

by Calculated Risk on 11/02/2024 02:11:00 PM

At the Calculated Risk Real Estate Newsletter this week:

Click on graph for larger image.

• Case-Shiller: National House Price Index Up 4.2% year-over-year in August

• Fannie and Freddie: Single Family and Multi-Family Serious Delinquency Rates Increased in September

• Inflation Adjusted House Prices 1.5% Below 2022 Peak

• Freddie Mac House Price Index Increased in September; Up 3.6% Year-over-year

• Lawler: Mortgage Rates Have Surged Since the Federal Reserve Cut Interest Rates Last Month

• A Proposal to Address the Housing Crisis

This is usually published 4 to 6 times a week and provides more in-depth analysis of the housing market.