by Calculated Risk on 11/14/2024 11:18:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Part 1: Current State of the Housing Market; Overview for mid-November 2024

A brief excerpt:

This 2-part overview for mid-October provides a snapshot of the current housing market.

I always focus first on inventory, since inventory usually tells the tale! I’m watching months-of-supply closely.
...
New home inventory, as a percentage of total inventory, is still very high. The following graph uses Not Seasonally Adjusted (NSA) existing home inventory from the National Association of Realtors® (NAR) and new home inventory from the Census Bureau (only completed and under construction inventory).

It took a number of years following the housing bust for new home inventory to return to the pre-bubble percent of total inventory. Then, with the pandemic, existing home inventory collapsed and now the percent of new homes is 20.8% of the total for sale inventory, down from a peak of 27.2% in December 2022.

The percent of new homes of total inventory should continue to decline as existing home inventory increases. However, the percent of new home inventory will increase seasonally over the Winter as existing homes are withdrawn from the market.

There is much more in the article.

by Calculated Risk on 11/14/2024 08:30:00 AM

The DOL reported:

In the week ending November 9, the advance figure for seasonally adjusted initial claims was 217,000, a decrease of 4,000 from the previous week's unrevised level of 221,000. The 4-week moving average was 221,000, a decrease of 6,250 from the previous week's unrevised average of 227,250.
emphasis added

The following graph shows the 4-week moving average of weekly claims since 1971.

Click on graph for larger image.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased to 221,000.

The previous week was unrevised.

Weekly claims were below the consensus forecast.

by Calculated Risk on 11/13/2024 07:24:00 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 255 thousand initial claims, up from 221 thousand last week.

• Also at 8:30 AM, The Producer Price Index for October from the BLS. The consensus is for a 0.3% increase in PPI, and a 0.2% increase in core PPI.

• At 3:00 PM, Speech, Fed Chair Jerome Powell, Economic Outlook, At Conversation with Federal Reserve Chair Jerome Powell, Dallas, Texas

by Calculated Risk on 11/13/2024 03:11:00 PM

The Cleveland Fed released the median CPI and the trimmed-mean CPI.

According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.3% in October. The 16% trimmed-mean Consumer Price Index increased 0.3%. "The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics’ (BLS) monthly CPI report".

Click on graph for larger image.

This graph shows the year-over-year change for these four key measures of inflation. 

On a year-over-year basis, the median CPI rose 4.1% (unchanged from 4.1% in September), the trimmed-mean CPI rose 3.2% (unchanged from 3.2%), and the CPI less food and energy rose 3.2% (unchanged from 3.2%). 

Core PCE is for September was up 2.7% YoY, unchanged from 2.7% in August.

Note: The Cleveland Fed released the median CPI details. Used cares increased at a 38% annual rate in October.

by Calculated Risk on 11/13/2024 11:57:00 AM

Today, in the Calculated Risk Real Estate Newsletter: NY Fed: Mortgage Originations by Credit Score, Delinquencies Increase, Foreclosures Remain Low

A brief excerpt:

The first graph shows mortgage originations by credit score (this includes both purchase and refinance). Look at the difference in credit scores in the recent period compared to the during the bubble years (2003 through 2006). Recently there have been almost no originations for borrowers with credit scores below 620, and few below 660. A significant majority of recent originations have been to borrowers with credit score above 760.
...
Solid underwriting is a key reason I’ve argued Don't Compare the Current Housing Boom to the Bubble and Bust, Look instead at the 1978 to 1982 period for lessons

There is much more in the article.

by Calculated Risk on 11/13/2024 11:00:00 AM

From the NY Fed: Household Debt Rose Modestly; Delinquency Rates Remain Elevated

The Federal Reserve Bank of New York’s Center for Microeconomic Data today issued its Quarterly Report on Household Debt and Credit. The report shows total household debt increased by $147 billion (0.8%) in Q3 2024, to $17.94 trillion. The report is based on data from the New York Fed’s nationally representative Consumer Credit Panel. It includes a one-page summary of key takeaways and their supporting data points.

The New York Fed also issued an accompanying Liberty Street Economics blog post examining the evolution in aggregate debt to income ratios and what that suggests about Americans’ ability to manage their debt obligations.

“Although household balances continue to rise in nominal terms, growth in income has outpaced debt,” said Donghoon Lee, Economic Research Advisor at the New York Fed. “Still, elevated delinquency rates reveal stress for many households, even amid some moderation in delinquency trends this quarter.”

Mortgage balances increased by $75 billion from the previous quarter and reached $12.59 trillion at the end of September. HELOC balances increased by $7 billion, representing the tenth consecutive quarterly increase since Q1 2022, and stood at $387 billion. Credit card balances increased by $24 billion to $1.17 trillion. Auto loan balances saw a $18 billion increase and stood at $1.64 trillion. Other balances, which include retail cards and other consumer loans, were effectively flat, with a $2 billion increase. Student loan balances grew by $21 billion, and now stand at $1.61 trillion.

The pace of mortgage originations increased slightly from the pace observed in the previous four quarters, with $448 billion of newly originated mortgages in Q3. Aggregate limits on credit card accounts increased modestly by $63 billion, representing a 1.3% increase from the previous quarter. Limits on HELOC increased by $9 billion, the tenth consecutive quarterly increase.

Aggregate delinquency rates edged up from the previous quarter, with 3.5% of outstanding debt in some stage of delinquency. Delinquency transition rates were mixed. Credit card delinquency rates improved, with 8.8% of balances transitioning to delinquency compared to 9.1% in the previous quarter. Early delinquency transitions for auto loans and mortgages worsened slightly, rising by 0.2 and 0.3 percentage points respectively. About 126,000 consumers had a bankruptcy notation added to their credit reports this quarter, a small decline from the previous quarter.
emphasis added

Click on graph for larger image.

Here are three graphs from the report:

The first graph shows household debt increased in Q3.  Household debt previously peaked in 2008 and bottomed in Q3 2013. Unlike following the great recession, there wasn't a decline in debt during the pandemic.

From the NY Fed:

Aggregate nominal household debt balances increased by $147 billion in the third quarter of 2024, a 0.8% rise from 2024Q2. Balances now stand at $17.94 trillion and have increased by $3.8 trillion since the end of 2019, just before the pandemic recession.

The second graph shows the percent of debt in delinquency.

The overall delinquency rate increased in Q3.  From the NY Fed:

Aggregate delinquency rates edged up slightly in the third quarter of 2024. As of September, 3.5 percent of outstanding debt was in some stage of delinquency, up from 3.2 percent in the second quarter. ... Delinquency transition rates were mixed. Credit card delinquency rates improved, with 8.8 percent of balances transitioning to delinquency at an annual rate compared to 9.1 percent in the previous quarter. Early delinquency transitions for auto loans and mortgages worsened slightly, rising by 0.2 and 0.3 percentage points respectively.

The third graph shows Mortgage Originations by Credit Score.

From the NY Fed:

Credit quality of newly originated loans edged up slightly, with some improvements in the credit scores of newly originating auto loan and mortgage borrowers. Two-thirds of newly originated mortgages went to borrowers with credit scores above 760, while the share of auto loans opened by the highest credit score group borrowers hovered just below the long-term high, at 37%.

There is much more in the report.

by Calculated Risk on 11/13/2024 08:52:00 AM

Here are a few measures of inflation:

The first graph is the one Fed Chair Powell had mentioned when services less rent of shelter was up around 8% year-over-year.  This declined, but is still elevated, and is now up 4.5% YoY.

Click on graph for larger image.

This graph shows the YoY price change for Services and Services less rent of shelter through September 2024.

Services were up 4.7% YoY as of October 2024, unchanged from 4.7% YoY in September.

Services less rent of shelter was up 4.5% YoY in October, up from 4.4% YoY in September.

The second graph shows that goods prices started to increase year-over-year (YoY) in 2020 and accelerated in 2021 due to both strong demand and supply chain disruptions.

Durables were at -2.5% YoY as of October 2024, up from -2.9% YoY in September.

Commodities less food and energy commodities were at -1.2% YoY in October, unchnaged from -1.2% YoY in September.

Here is a graph of the year-over-year change in shelter from the CPI report (through October) and housing from the PCE report (through September)

Shelter was up 4.9% year-over-year in October, up from 4.8% in September. Housing (PCE) was up 5.1% YoY in September, down from 5.3% in August.

The BLS noted this morning: "The index for shelter rose 0.4 percent in October, accounting for over half of the monthly all items increase."

This is still catching up with private data.

Core CPI ex-shelter was up 2.0% YoY in October.

by Calculated Risk on 11/13/2024 08:30:00 AM

From the BLS:

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent on a seasonally adjusted basis in October, the same increase as in each of the previous 3 months, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 2.6 percent before seasonal adjustment.

The index for shelter rose 0.4 percent in October, accounting for over half of the monthly all items increase. The food index also increased over the month, rising 0.2 percent as the food at home index increased 0.1 percent and the food away from home index rose 0.2 percent. The energy index was unchanged over the month, after declining 1.9 percent in September.

The index for all items less food and energy rose 0.3 percent in October, as it did in August and September. Indexes that increased in October include shelter, used cars and trucks, airline fares, medical care, and recreation. The indexes for apparel, communication, and household furnishings and operations were among those that decreased over the month.

The all items index rose 2.6 percent for the 12 months ending October, after rising 2.4 percent over the 12 months ending September. The all items less food and energy index rose 3.3 percent over the last 12 months. The energy index decreased 4.9 percent for the 12 months ending October. The food index increased 2.1 percent over the last year.
emphasis added

The change in CPI was at expectations. I'll post a graph later today after the Cleveland Fed releases the median and trimmed-mean CPI.

by Calculated Risk on 11/13/2024 07:00:00 AM

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

Mortgage applications increased 0.5 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending November 8, 2024.

The Market Composite Index, a measure of mortgage loan application volume, increased 0.5 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 2 percent compared with the previous week. The Refinance Index decreased 2 percent from the previous week and was 43 percent higher than the same week one year ago. The seasonally adjusted Purchase Index increased 2 percent from one week earlier. The unadjusted Purchase Index decreased 2 percent compared with the previous week and was 1 percent higher than the same week one year ago.

“Mortgage rates continued to increase last week, driven by higher Treasury yields as financial markets digested the likely impacts of a Trump presidency. The Federal Reserve’s 25-basis-point rate cut was already anticipated and did little to move the markets,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “The 30-year fixed rate was at 6.86 percent last week, its highest since July 2024. However, despite the increase in rates, applications increased for the first time in seven weeks.”

Added Kan, “Purchase applications picked up and remained close to levels from a year ago. FHA and VA purchase applications drove the stronger overall purchase activity, increasing 3 percent and 9 percent, respectively. FHA mortgage rates bucked the overall trend and were lower over the week, which likely helped some borrowers. Conventional purchase applications were also up slightly. Meanwhile, the upward climb in rates led to refinance activity falling to its lowest level since May 2024.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) increased to 6.86 percent from 6.81 percent, with points decreasing to 0.60 from 0.68 (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 1% year-over-year unadjusted. 

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

Purchase application activity is up about 6% from the lows in late October 2023, but still about 12% 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 as mortgage rates declined in September but has decreased as rates moved back up.

by Calculated Risk on 11/12/2024 07:46:00 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 8:30 AM, The Consumer Price Index for October from the BLS. The consensus is for a 0.2% increase in CPI, and a 0.3% increase in core CPI.  The consensus is for CPI to be up 2.6% year-over-year and core CPI to be up 3.3% YoY.

• At 11:00 AM, NY Fed: Q3 Quarterly Report on Household Debt and Credit