by Calculated Risk on 2/19/2025 09:17:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Housing Starts Decreased to 1.366 million Annual Rate in January

A brief excerpt:

Total housing starts in January were below expectations; however, starts in November and December were revised up.

The third graph shows the month-to-month comparison for total starts between 2024 (blue) and 2025 (red).

Total starts were down 0.7% in January compared to January 2024. There were significant regional differences in January with starts in the Northeast region down sharply year-over-year (likely weather related).

Single family starts have been up year-over-year in 14 of the last 19 months, whereas multi-family has been up year-over-year in only 4 of last 20 months.

There is much more in the article.

Weekly Schedule

by Calculated Risk on 2/19/2025 08:30:00 AM

From the Census Bureau: Permits, Starts and Completions

Housing Starts:
Privately-owned housing starts in January were at a seasonally adjusted annual rate of 1,366,000. This is 9.8 percent below the revised December estimate of 1,515,000 and is 0.7 percent below the January 2024 rate of 1,376,000. Single-family housing starts in January were at a rate of 993,000; this is 8.4 percent below the revised December figure of 1,084,000. The January rate for units in buildings with five units or more was 355,000.

Building Permits:
Privately-owned housing units authorized by building permits in January were at a seasonally adjusted annual rate of 1,483,000. This is 0.1 percent above the revised December rate of 1,482,000, but is 1.7 percent below the January 2024 rate of 1,508,000. Single-family authorizations in January were at a rate of 996,000; this is virtually unchanged from the revised December figure of 996,000. Authorizations of units in buildings with five units or more were at a rate of 427,000 in January.
emphasis added

Click on graph for larger image.

The first graph shows single and multi-family housing starts since 2000.

Multi-family starts (blue, 2+ units) decreased month-over-month in January.   Multi-family starts were up 2.2% year-over-year.

Single-family starts (red) decreased in January and were down 1.8% year-over-year.

The second graph shows single and multi-family housing starts since 1968.

This shows the huge collapse following the housing bubble, and then the eventual recovery - and the recent collapse and recovery in single-family starts.

Total housing starts in January were below expectations; however, starts in November and December were revised up.

I'll have more later …

by Calculated Risk on 2/19/2025 07:00:00 AM

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

Mortgage applications decreased 6.6 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending February 14, 2025.

The Market Composite Index, a measure of mortgage loan application volume, decreased 6.6 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 4 percent compared with the previous week. The Refinance Index decreased 7 percent from the previous week and was 39 percent higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 6 percent from one week earlier. The unadjusted Purchase Index decreased 1 percent compared with the previous week and was 7 percent higher than the same week one year ago.

“Mortgage rates decreased on average over the week, as markets brushed off unexpectedly strong inflation data. Despite mortgage rates declining, with the 30-year fixed mortgage rate dropping to 6.93 percent, mortgage applications decreased to their slowest pace since the beginning of the year,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Purchase applications were down for the week, as buyers remained on the fence, although loosening inventory may help support activity in the coming months. Refinance applications had been rising in previous weeks but dipped as rates remained close to 7 percent.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased to 6.93 percent from 6.95 percent, with points increasing to 0.66 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 7% year-over-year unadjusted. 

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

Purchase application activity is up about 15% from the lows in late October 2023 and is now 5% below the lowest levels during the housing bust.  

The second graph shows the refinance index since 1990.

The refinance index remains very low.

by Calculated Risk on 2/18/2025 07:03:00 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 mortgage purchase applications index.

• At 8:30 AM, Housing Starts for January. The consensus is for 1.394 million SAAR, down from 1.499 million SAAR.

• During the day, The AIA's Architecture Billings Index for January (a leading indicator for commercial real estate).

• At 2:00 PM, FOMC Minutes, Meeting of Meeting of January 28-29, 2025

by Calculated Risk on 2/18/2025 02:16:00 PM

From the MBA: Share of Mortgage Loans in Forbearance Decreases to 0.40% in January

The Mortgage Bankers Association’s (MBA) monthly Loan Monitoring Survey revealed that the total number of loans now in forbearance decreased by 7 basis points from 0.47% of servicers’ portfolio volume in the prior month to 0.40% as of January 31, 2025. According to MBA’s estimate, 200,000 homeowners are in forbearance plans.

The share of Fannie Mae and Freddie Mac loans in forbearance decreased 2 basis points to 0.17% in January 2025. Ginnie Mae loans in forbearance decreased by 19 basis points to 0.88%, and the forbearance share for portfolio loans and private-label securities (PLS) remained the same as the prior month at 0.40%.

“While the number of forbearance requests grew in January, the number of forbearance exits outweighed that pick-up, reaching the highest level since June 2022,” said Marina Walsh, CMB, MBA’s Vice President of Industry Analysis. “This outcome was somewhat surprising given the recent events in California, but it speaks to recovery in other parts of the country affected by natural disasters and the movement of aged government loans out of forbearance.”

Added Walsh, “As the number of borrowers in forbearance dropped this past month, the number of borrowers with permanent loan workouts grew. Today, approximately 6.5 percent of all borrowers – or 3.3 million homeowners – are in a loan workout completed in 2020 or after.”
...
By reason, 64.1% of borrowers are in forbearance for reasons such as a temporary hardship caused by job loss, death, divorce, or disability. Another 32.9% are in forbearance because of a natural disaster. The remaining 3.0% of borrowers are still in forbearance because of COVID-19.
emphasis added

At the end of January, there were about 200,000 homeowners in forbearance plans.

by Calculated Risk on 2/18/2025 12:24:00 PM

Today, in the Calculated Risk Real Estate Newsletter: The "Neutral" Rate and Implications for 30-year Mortgage Rates

A brief excerpt:

Housing economist Tom Lawler has written extensively on the neutral rate. He has argued that the neutral rate has increased back to pre-financial crisis levels and that it seems like that “the current stance of monetary policy is not meaningfully restrictive”.

Analysts are catching up. This morning, economists at BofA wrote: “The most reasonable interpretation of the data flow seems to be that the neutral rate has increased a lot more than previously thought, and policy might not be restrictive at all.”
...
In normal times, the 30-year mortgage rate is typically 175 to 200 bp above the 10-year yield. Here is a graph of the relationship between 30-year mortgage rates and the 10-year yield since 1971.

The red dots are the for the period Jan 2022 until today. This shows that the spread increased with the inverted yield curve.

There is much more in the article.

by Calculated Risk on 2/18/2025 10:00:00 AM

The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 42, down from 47 last month. Any number below 50 indicates that more builders view sales conditions as poor than good.

From the NAHB: Builder Confidence Falls on Tariff and Housing Cost Concerns

Builder sentiment fell sharply in February over concerns on tariffs, elevated mortgage rates and high housing costs.

Builder confidence in the market for newly built single-family homes was 42 in February, down five points from January and the lowest level in five months, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released today.

“While builders hold out hope for pro-development policies, particularly for regulatory reform, policy uncertainty and cost factors created a reset for 2025 expectations in the most recent HMI,” said NAHB Chairman Carl Harris, a custom home builder from Wichita, Kan. “Uncertainty on the tariff front helped push builders’ expectations for future sales volume down to the lowest level since December 2023. Incentive use may also be weakening as a sales strategy as elevated interest rates reduce the pool of eligible home buyers.”

“With 32% of appliances and 30% of softwood lumber coming from international trade, uncertainty over the scale and scope of tariffs has builders further concerned about costs,” said NAHB Chief Economist Robert Dietz. “Reflecting this outlook, builder responses collected prior to a pause for the proposed tariffs on goods from Canada and Mexico yielded a lower HMI reading of 38, while those collected after the announced one-month pause produced a score of 44. Addressing the elevated pace of shelter inflation requires bending the housing cost curve to enable adding more attainable housing.

The latest HMI survey also revealed that 26% of builders cut home prices in February, down from 30% in January and the lowest share since May 2024. Meanwhile, the average price reduction was 5% in February, the same rate as the previous month. The use of sales incentives was 59% in February, down from 61% in January.
...
All three of the major HMI indices posted losses in February. The HMI index gauging current sales conditions fell four points to 46, the component measuring sales expectations in the next six months plunged 13 points to 46, and the gauge charting traffic of prospective buyers posted a three-point decline to 29.

Looking at the three-month moving averages for regional HMI scores, the Northeast fell three points in February to 57, the Midwest moved two points lower to 45, the West edged one-point lower to 39 and the South held steady at 46.
emphasis added

Click on graph for larger image.

This graph shows the NAHB index since Jan 1985.

This was below the consensus forecast.

by Calculated Risk on 2/17/2025 06:23:00 PM

Weekend:
• Schedule for Week of February 16, 2025

Tuesday:
• At 8:30 AM ET, The New York Fed Empire State manufacturing survey for February. The consensus is for a reading of -1.0, up from -12.6.

• At 10:00 AM, The February NAHB homebuilder survey.  The consensus is for a reading of 47, unchanged from 47 the previous month. Any number below 50 indicates that more builders view sales conditions as poor than good.

From CNBC: Pre-Market Data and Bloomberg futures S&P 500 are up 7 and DOW futures are down 75 (fair value).

Oil prices were up over the last week with WTI futures at $71.39 per barrel and Brent at $75.29 per barrel. A year ago, WTI was at $80, and Brent was at $85 - so WTI oil prices are down about 11% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $3.12 per gallon. A year ago, prices were at $3.26 per gallon, so gasoline prices are down $0.14 year-over-year.

by Calculated Risk on 2/17/2025 02:08:00 PM

I usually celebrate President Washington's birthday by reading his Farewell Address. A brief excerpt:

To the efficacy and permanency of your Union, a Government for the whole is indispensable. No alliances, however strict, between the parts can be an adequate substitute; they must inevitably experience the infractions and interruptions, which all alliances in all times have experienced. Sensible of this momentous truth, you have improved upon your first essay, by the adoption of a Constitution of Government better calculated than your former for an intimate Union, and for the efficacious management of your common concerns. This Government, the offspring of our own choice, uninfluenced and unawed, adopted upon full investigation and mature deliberation, completely free in its principles, in the distribution of its powers, uniting security with energy, and containing within itself a provision for its own amendment, has a just claim to your confidence and your support. Respect for its authority, compliance with its laws, acquiescence in its measures, are duties enjoined by the fundamental maxims of true Liberty. The basis of our political systems is the right of the people to make and to alter their Constitutions of Government. But the Constitution which at any time exists, till changed by an explicit and authentic act of the whole people, is sacredly obligatory upon all. The very idea of the power and the right of the people to establish Government presupposes the duty of every individual to obey the established Government.

All obstructions to the execution of the Laws, all combinations and associations, under whatever plausible character, with the real design to direct, control, counteract, or awe the regular deliberation and action of the constituted authorities, are destructive of this fundamental principle, and of fatal tendency. They serve to organize faction, to give it an artificial and extraordinary force; to put, in the place of the delegated will of the nation, the will of a party, often a small but artful and enterprising minority of the community; and, according to the alternate triumphs of different parties, to make the public administration the mirror of the ill-concerted and incongruous projects of faction, rather than the organ of consistent and wholesome plans digested by common counsels, and modified by mutual interests.

However combinations or associations of the above description may now and then answer popular ends, they are likely, in the course of time and things, to become potent engines, by which cunning, ambitious, and unprincipled men will be enabled to subvert the power of the people, and to usurp for themselves the reins of government; destroying afterwards the very engines, which have lifted them to unjust dominion.
emphasis added

by Calculated Risk on 2/17/2025 10:47:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Lawler: Early Read on Existing Home Sales in January

A brief excerpt:

From housing economist Tom Lawler:

Based on publicly-available local realtor/MLS reports released across the country through today, I project that existing home sales as estimated by the National Association of Realtors ran at a seasonally adjusted annual rate of 4.09 million in January, down 3.5% from December’s preliminary pace and up 2.3% from last January’s seasonally adjusted pace.

Note that this month’s existing home sales release will incorporate new seasonal factors, which will probably “smooth” monthly sales a little for last year – with slightly slower SA sales for the February-May period and slightly higher SA sales for the June-October period. I am assuming this January’s seasonal factor won’t be materially different from last January’s.

Local realtor/MLS reports suggest that the median existing single-family home sales price last month was up by about 5% from a year earlier.

CR Note: The NAR is scheduled to release January Existing Home sales on Friday, February 21st at 10:00 AM. The consensus is for 4.10 million SAAR, down from 4.24 million in December. Last year, the NAR reported sales in January 2024 at 4.00 million SAAR.

There is much more in the article.