by Calculated Risk on 9/19/2021 11:20:00 AM

Expectations are there will be no change to rate policy when the FOMC meets on Tuesday and Wednesday this week.  However, there is an expectation that the FOMC will make it clear that they intend to start the tapering of asset purchases soon.

Here are some comments from Goldman Sachs economists on the timing of tapering:

The FOMC is likely to provide the promised “advance notice” that tapering is coming at its September meeting, paving the way to announce the start of tapering at its November meeting. Specifically, we expect the September FOMC statement to say something along the lines of, “The Committee expects to begin reducing the pace of its asset purchases relatively soon, provided that the economy evolves broadly as anticipated.”

Analysts will also be looking for comments on inflation, although the Fed is probably not overly concerned with inflation right now. Some of the recent increase in inflation was due to base effects (prices declined at the beginning of the pandemic), and some probably due to transitory effects related to supply bottlenecks.  However, the recent surge in COVID cases has probably extended the supply chain disruptions, and there is growing concern that rising rents will spill through to Owners' Equivalent Rent (OER) - a large component of CPI and PCE prices - and push up PCE inflation in 2022.

Updated projections will be released at this meeting.  For review, here are the June FOMC projections.

Wall Street forecasts were for GDP to increase at a 8.6% annual rate in Q2 (came in at 6.6%) and forecasts for Q3 have been downgraded recently.  So the FOMC GDP projections are now too high and will likely be revised back down to around the March projection range for 2021.

GDP projections of Federal Reserve Governors and Reserve Bank presidents, Change in Real GDP1
Projection Date	2021	2022	2023
June 2021	6.8 to 7.3	2.8 to 3.8	2.0 to 2.5
Mar 2021	5.8 to 6.6	3.0 to 3.8	2.0 to 2.5

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 5.2% in August.

Note that the unemployment rate doesn't capture the economic damage to the labor market.  Not only are there 2.7 million more people currently unemployed than prior to the pandemic, over 2.9 million people have left the labor force since February 2020.  And millions more were being supported by various provisions of the disaster relief acts.

Any change to the June unemployment rate projections will probably be minor.

Unemployment projections of Federal Reserve Governors and Reserve Bank presidents, Unemployment Rate2
Projection Date	2021	2022	2023
June 2021	4.4 to 4.8	3.5 to 4.0	3.2 to 3.8
Mar 2021	4.2 to 4.7	3.6 to 4.0	3.2 to 3.8

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

As of July 2021, PCE inflation was up 4.2% from July 2020.   Projections for PCE inflation in 2021 will be revised up closer to 4%. 

Inflation projections of Federal Reserve Governors and Reserve Bank presidents, PCE Inflation1
Projection Date	2021	2022	2023
June 2021	3.1 to 3.5	1.9 to 2.3	2.0 to 2.2
Mar 2021	2.2 to 2.4	1.8 to 2.1	2.0 to 2.2

PCE core inflation was up 3.6% in July year-over-year.   Core PCE inflation projections for 2021 will also be revised up.

Core Inflation projections of Federal Reserve Governors and Reserve Bank presidents, Core Inflation1
Projection Date	2021	2022	2023
June 2021	2.9 to 3.1	1.9 to 2.3	2.0 to 2.2
Mar 2021	2.0 to 2.3	1.9 to 2.1	2.0 to 2.2

by Calculated Risk on 9/18/2021 02:00:00 PM

At the Calculated Risk Newsletter this week:

Analysis:
• The Rapid Increase in Rents; What is happening? Why? And what will happen.

• House Price to Median Income; New Data for 2020 Income

• Household Formation Drives Housing Demand; Some preliminary data and analysis

Local Real Estate data:

• California August Housing: Sales down 11% YoY, "Home sales temper in August"

• 5 More Local Housing Markets in August; Alabama, Austin, Maryland, Phoenix, Rhode Island

• Another 5 Local Housing Markets in August; Boston, Des Moines, Jacksonville, Minnesota, South Carolina

• 5 Additional Local Housing Markets in August; Albuquerque, Colorado, Houston, Memphis and Nashville

This will usually be published several times a week, and will provide more in-depth analysis of the housing market.

The blog will continue as always!

You can subscribe at https://calculatedrisk.substack.com/ (Currently all content is available for free, but please subscribe).

by Calculated Risk on 9/18/2021 08:11:00 AM

The key reports this week are August Housing Starts, and New and Existing Home sales.

The FOMC meets this week, and no change to policy is expected.

----- Monday, September 20th -----
10:00 AM: The September NAHB homebuilder survey. The consensus is for a reading of  74, down from 75 in August. Any number above 50 indicates that more builders view sales conditions as good than poor.

----- Tuesday, September 21st -----
8:30 AM: Housing Starts for August.

This graph shows single and total housing starts since 1968.

The consensus is for 1.560 million SAAR, up from 1.534 million SAAR.

----- Wednesday, September 22nd -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

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

10:00 AM: Existing Home Sales for August from the National Association of Realtors (NAR). The consensus is for 5.81 million SAAR, down from 5.99 million in July.

The graph shows existing home sales from 1994 through the report last month.

Housing economist Tom Lawler expects the NAR to report 5.88 million SAAR.

2:00 PM: FOMC Meeting Announcement. No change to policy is expected at this meeting.

2:00 PM: FOMC Forecasts This will include the Federal Open Market Committee (FOMC) participants' projections of the appropriate target federal funds rate along with the quarterly economic projections.

2:30 PM: Fed Chair Jerome Powell holds a press briefing following the FOMC announcement.

----- Thursday, September 23rd -----
8:30 AM: The initial weekly unemployment claims report will be released.  The consensus is for 320 thousand initial claims, down from 332 thousand last week.

8:30 AM ET: Chicago Fed National Activity Index for August. This is a composite index of other data.

11:00 AM: the Kansas City Fed manufacturing survey for September.

12:00 PM: Q2 Flow of Funds Accounts of the United States from the Federal Reserve.

----- Friday, September 24th -----
10:00 AM: New Home Sales for August from the Census Bureau.

This graph shows New Home Sales since 1963. The dashed line is the sales rate for last month.

The consensus is for 714 thousand SAAR, up from 708 thousand in July.

10:00 AM: Opening Remarks, Fed Chair Jerome Powell, At Fed Listens: Perspectives on the Pandemic Recovery

by Calculated Risk on 9/17/2021 04:54:00 PM

NYU Stern professor Arpit Gupta tweeted today:

A common intuition is that borrowers put 20% down on a home.

The median down payment is actually closer to 5%, and has been for 12 years.

He included a chart from the Urban Institute showing the median LTV for new mortgage loan originations is 95% - and has been at that level for the last 12 years.

Gupta linked to the Housing Finance Policy Center's Monthly Chartbook

Here is the chart that also includes FICO and Debt-to-income (DTI).   The median DTI is at 37.5%.

Note that this is combined LTV, and probably includes 2nd loans.   Legend at top.

by Calculated Risk on 9/17/2021 04:09:00 PM

Note: There will be no weekend updates.

The CDC is the source for all data.

The 7-day average deaths is the highest since March 1st.

According to the CDC, on Vaccinations.  Total doses administered: 383,994,877, as of a week ago 378,569,717. Average doses last week: 0.78 million per day.

COVID Metrics
	Today	Week Ago	Goal
Percent fully Vaccinated	54.4%	53.6%	≥70.0%1
Fully Vaccinated (millions)	180.6	177.9	≥2321
New Cases per Day3🚩	142,736	139,221	≤5,0002
Hospitalized3	88,506	93,097	≤3,0002
Deaths per Day3🚩	1,464	1,253	≤502
1 Minimum to achieve "herd immunity" (estimated between 70% and 85%). 2my goals to stop daily posts, 37 day average for Cases, Currently Hospitalized, and Deaths 🚩 Increasing 7 day average week-over-week for Cases, Hospitalized, and Deaths ✅ Goal met.

IMPORTANT: For "herd immunity" most experts believe we need 70% to 85% of the total population fully vaccinated (or already had COVID).  

This is all from the CDC - state data may differ!

KUDOS to the residents of the 11 states that have achieved 60% of total population fully vaccinated: Vermont at 68.8%, Massachusetts, Maine, Connecticut, Rhode Island, Maryland, New Jersey, Washington, New York, New Mexico, New Hampshire at 60.9%.

The following 18 states and D.C. have between 50% and 59.9% fully vaccinated: Oregon at 59.6%, District of Columbia, Virginia, Colorado, Minnesota, California, Hawaii, Delaware, Pennsylvania, Wisconsin, Florida, Nebraska, Iowa, Illinois, Michigan, South Dakota, Kentucky, Arizona and Kansas at 50.0%.

Next up (total population, fully vaccinated according to CDC) are Texas at 49.8%,  Nevada at 49.6%, Ohio at 49.4%, Utah at 49.2%, Alaska at 48.8% and North Carolina at 48.4%.

Click on graph for larger image.

This graph shows the daily (columns) and 7 day average (line) of positive tests reported.

by Calculated Risk on 9/17/2021 01:43:00 PM

From housing economist Tom Lawler (see important comments on inventory):

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 5.90 million in August, down 1.5% from July’s preliminary pace and down 1.2% from last August’s seasonally adjusted pace. Unadjusted sales should show a very small YOY gain, with the SA/NSA difference reflecting this August’s higher business day count relative to last August’s.

Local realtor reports, as well as reports from national inventory trackers, suggest that while the inventory of existing homes for sale remained low last month, the YOY decline in August was significantly less than in July. What this means for the NAR’s inventory estimate for August, however, is unclear.  As I’ve noted before, the inventory measure in most publicly-released local realtor/MLS reports excludes listings with pending contracts, but that is not the case for most of the reports sent to the NAR (referred to as the “NAR Report!”), Since the middle of last Spring inventory measures excluding pending listings have fallen much more sharply than inventory measures including such listings, and this latter inventory measure understates the decline in the effective inventory of homes for sale over the last several months. Having said that, however, it is clear that seasonally adjusted inventories have been trending higher over the past several months.

Finally, local realtor/MLS reports suggest the median existing single-family home sales price last month was up by about 14.7% from last August.

CR Note: The National Association of Realtors (NAR) is scheduled to release August existing home sales on Wednesday, September 22, 2021 at 10:00 AM ET. The consensus is for 5.88 million SAAR.

by Calculated Risk on 9/17/2021 12:55:00 PM

In the Newsletter: 5 More Local Housing Markets in August

This brings the total to 25 local markets for August. This includes active inventory, new listings and sales added for Alabama, Austin, Maryland, Phoenix, Rhode Island

So far active inventory is down 1.1% compared to July for these markets

by Calculated Risk on 9/17/2021 10:46:00 AM

GDP forecasts had been downgraded sharply for Q3 due to COVID, but now seem to have stabilized. 

Here is a table of some of the forecasts over the last two months.

	Merrill	Goldman	GDPNow
7/30/21	7.0%	9.0%	6.1%
8/20/21	4.5%	5.5%	6.1%
9/10/21	4.5%	3.5%	3.7%
9/17/21	4.5%	4.5%	3.6%

From BofA Merrill Lynch:

We continue to track 4.5% qoq saar for 3Q GDP following the retail sales data as our forecast was far above consensus. [Sept 17 estimate]
emphasis added

From Goldman Sachs:

Following the stronger-than-expected retail sales report, we boosted our Q3 GDP tracking estimate by 1pp at +4.5% (qoq ar). We are also lowering our 2021Q4 and 2022Q2 GDP forecasts by 0.5pp to reflect a smaller rebound from 2021Q3. [Sept 16 estimate]

And from the Altanta Fed: GDPNow

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2021 is 3.6 percent on September 16, down from 3.7 percent on September 10 after rounding. [Sept 16 estimate]

by Calculated Risk on 9/17/2021 08:34:00 AM

Note: Both Black Knight and the MBA (Mortgage Bankers Association) are putting out weekly estimates of mortgages in forbearance.

This data is as of September 14th.

From Andy Walden at Black Knight: Forbearances Below 1.6M For First Time Since Start of Pandemic

The number of active forbearance plans fell by 22K (-1.4%) this week, bringing the total number of U.S. homeowners in COVID-19 forbearance below 1.6M for the first time since the start of the pandemic.

Matching 15,000 declines in plans among both GSE and FHA/VA loans were partially offset by an 8,000 rise in PLS/portfolio plans. Overall, forbearances are now down 156K (-8.9%) from the same time last month.

As of September 14, nearly 1.6 million mortgage holders remain in COVID-19 related forbearance plans, representing 3% of all active mortgages, including 1.7% of GSE, 5.2% of FHA/VA and 3.8% of portfolio held and privately securitized loans.

Both new forbearance plans and plan restarts rose this week, with new plan starts trending higher since mid-August.

The rise in new plan starts is almost solely limited to FHA/VA loans, coinciding with the deadline for entry into forbearance for such loans expiring at the end of September. That said, unemployment benefits lapsed over the Labor Day weekend and COVID caseloads continue to rise, so it’s difficult to pinpoint the exact cause.

With two weeks left in the month, we have already seen 218,000 plan exits over just the first half of September. Meanwhile, plan extensions are at their lowest since the onset of the pandemic, with only 45,000 plans extended this week.

With more than 462,000 plans scheduled for review for extension/removal in September, exit volumes could be poised to rise sharply at the start of October. As many as 330,000 are set to reach their final plan expirations based on current allowable forbearance term lengths.
emphasis added

by Calculated Risk on 9/16/2021 04:59:00 PM

The CDC is the source for all data.

The 7-day average deaths is the highest since March 1st.

According to the CDC, on Vaccinations.  Total doses administered: 383,038,403, as of a week ago 377,622,065. Average doses last week: 0.90 million per day.

COVID Metrics
	Today	Week Ago	Goal
Percent fully Vaccinated	54.2%	53.4%	≥70.0%1
Fully Vaccinated (millions)	180.1	177.4	≥2321
New Cases per Day3🚩	146,182	137,783	≤5,0002
Hospitalized3	89,132	93,255	≤3,0002
Deaths per Day3🚩	1,233	1,447	≤502
1 Minimum to achieve "herd immunity" (estimated between 70% and 85%). 2my goals to stop daily posts, 37 day average for Cases, Currently Hospitalized, and Deaths 🚩 Increasing 7 day average week-over-week for Cases, Hospitalized, and Deaths ✅ Goal met.

IMPORTANT: For "herd immunity" most experts believe we need 70% to 85% of the total population fully vaccinated (or already had COVID).  

This is all from the CDC - state data may differ!

KUDOS to the residents of the 11 states that have achieved 60% of total population fully vaccinated: Vermont at 68.8%, Massachusetts, Maine, Connecticut, Rhode Island, Maryland. New Jersey, Washington, New York, New Mexico, New Hampshire at 60.8%.

The following 16 states and D.C. have between 50% and 59.9% fully vaccinated: Oregon at 59.5%, District of Columbia, Virginia, Colorado, Minnesota, California, Hawaii, Delaware, Pennsylvania, Wisconsin, Florida, Nebraska, Iowa, Illinois, Michigan, South Dakota, Kentucky and Arizona at 50.0%.

Next up (total population, fully vaccinated according to CDC) are Kansas at 49.9%, Nevada at 49.5%, Texas at 49.5%,  Ohio at 49.3%, Utah at 49.1% and Alaska at 48.6%.

Click on graph for larger image.

This graph shows the daily (columns) and 7 day average (line) of positive tests reported.