by Calculated Risk on 10/01/2021 10:21:00 AM

From the Census Bureau reported that overall construction spending was "virtually unchanged":

Construction spending during August 2021 was estimated at a seasonally adjusted annual rate of $1,584.1 billion, virtually unchanged from the revised July estimate of $1,584.0 billion. The August figure is 8.9 percent above the August 2020 estimate of $1,455.0 billion. During the first eight months of this year, construction spending amounted to $1,034.5 billion, 7.0 percent above the $966.7 billion for the same period in 2020.
emphasis added

Private spending decreased and public spending increased:

Spending on private construction was at a seasonally adjusted annual rate of $1,242.2 billion, 0.1 percent below the revised July estimate of $1,243.7 billion. ...

In August, the estimated seasonally adjusted annual rate of public construction spending was $341.9 billion, 0.5 percent above the revised July estimate of $340.3 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 spending is 16% above the bubble peak (in nominal terms - not adjusted for inflation).

Non-residential spending is 10% above the bubble era peak in January 2008 (nominal dollars), but has been weak recently.

Public construction spending is 9% above the peak in March 2009, but weak recently.

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

On a year-over-year basis, private residential construction spending is up 24.3%. Non-residential spending is down 2.3% year-over-year. Public spending is unchanged year-over-year.

Construction was considered an essential service during the early months of the pandemic in most areas, and did not decline sharply like many other sectors.  However, some sectors of non-residential have been under pressure. For example, lodging is down 30.7% YoY, multi-retail down 2.0% YoY (from very low levels), and office down 4.2% YoY.

This was below consensus expectations of a 0.3% increase in spending, however construction spending for the previous two months was revised up slightly.

by Calculated Risk on 10/01/2021 10:05:00 AM

(Posted with permission). The ISM manufacturing index indicated expansion in September. The PMI® was at 61.1% in September, up from 59.9% in August. The employment index was at 50.2%, up from 49.0% last month, and the new orders index was at 66.7%, unchanged from 66.7%.

From ISM: Manufacturing PMI® at 61.1% September 2021 Manufacturing ISM® Report On Business®

Economic activity in the manufacturing sector grew in September, with the overall economy notching a 16th consecutive month of growth, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.

The report was issued today by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee:

"The September Manufacturing PMI® registered 61.1 percent, an increase of 1.2 percentage points from the August reading of 59.9 percent. This figure indicates expansion in the overall economy for the 16th month in a row after contraction in April 2020. The New Orders Index registered 66.7 percent, unchanged from the August reading. The Production Index registered 59.4 percent, a decrease of 0.6 percentage point compared to the August reading of 60 percent. The Prices Index registered 81.2 percent, up 1.8 percentage points compared to the August figure of 79.4 percent. The Backlog of Orders Index registered 64.8 percent, 3.4 percentage points lower than the August reading of 68.2 percent. The Employment Index returned to growth with a reading at 50.2 percent, 1.2 percentage points higher compared to the August reading of 49 percent. The Supplier Deliveries Index registered 73.4 percent, up 3.9 percentage points from the August figure of 69.5 percent. The Inventories Index registered 55.6 percent, 1.4 percentage points higher than the August reading of 54.2 percent. The New Export Orders Index registered 53.4 percent, a decrease of 3.2 percentage points compared to the August reading of 56.6 percent. The Imports Index registered 54.9 percent, an 0.6-percentage point increase from the August reading of 54.3 percent.”
emphasis added

This was above expectations, and this suggests manufacturing expanded at a slightly faster pace in September than in August.

by Calculated Risk on 10/01/2021 08:36:00 AM

The BEA released the Personal Income and Outlays report for August:

Personal income increased $35.5 billion (0.2 percent) in August according to estimates released today by the Bureau of Economic Analysis. Disposable personal income (DPI) increased $18.9 billion (0.1 percent) and personal consumption expenditures (PCE) increased $130.5 billion (0.8 percent).

Real DPI decreased 0.3 percent in August and Real PCE increased 0.4 percent; goods increased 0.6 percent and services increased 0.3 percent. The PCE price index increased 0.4 percent. Excluding food and energy, the PCE price index increased 0.3 percent.
emphasis added

The August PCE price index increased 4.3 percent year-over-year and the August PCE price index, excluding food and energy, increased 3.6 percent year-over-year.

The following graph shows real Personal Consumption Expenditures (PCE) through August 2021 (2012 dollars). Note that the y-axis doesn't start at zero to better show the change.

Click on graph for larger image.

The dashed red lines are the quarterly levels for real PCE.

Personal income was slightly below expectations,  and the increase in PCE was above expectations.

Using the two-month method to estimate Q3 PCE growth, PCE was increasing at a 0.3% annual rate in Q3 2021. (using the mid-month method, PCE was  increasing at 2.2%).  This follows a sharp increase in PCE in Q2.

by Calculated Risk on 9/30/2021 09:00:00 PM

Friday:
• At 8:30 AM ET, Personal Income and Outlays for August. The consensus is for a 0.3% increase in personal income, and for a 0.6% increase in personal spending. And for the Core PCE price index to increase 0.2%.

• At 10:00 AM, ISM Manufacturing Index for September. The consensus is for a reading of 59.5, down from 59.9 in August. 

• Also at 10:00 AM, Construction Spending for August. The consensus is for a 0.3% increase.

• Late: Light vehicle sales for September. The consensus is for sales of 13.4 million SAAR, up from 13.1 million SAAR in August (Seasonally Adjusted Annual Rate).

by Calculated Risk on 9/30/2021 07:12:00 PM

The CDC is the source for all data.

According to the CDC, on Vaccinations.  Total doses administered: 392,909,995, as of a week ago 387,821,704, or 0.85 million doses per day.

COVID Metrics
	Today	Week Ago	Goal
Percent fully Vaccinated	55.6%	55.0%	≥70.0%1
Fully Vaccinated (millions)	184.6	182.6	≥2321
New Cases per Day3	106,394	122,659	≤5,0002
Hospitalized3	73,437	82,827	≤3,0002
Deaths per Day3	1,476	1,527	≤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).  

KUDOS to the residents of the 13 states and D.C. that have achieved 60% of total population fully vaccinated: Vermont at 69.5%, Connecticut, Maine, Rhode Island, Massachusetts, New Jersey, Maryland, New York, New Mexico, New Hampshire, Washington, Oregon, Virginia, and District of Columbia at 60.1%.

The following 21 states have between 50% and 59.9% fully vaccinated: Colorado at 59.4%, California, Minnesota, Hawaii, Pennsylvania, Delaware, Florida, Wisconsin, Texas, Nebraska, Iowa, Illinois, Michigan, Kentucky, South Dakota, Arizona, Kansas, Nevada, Alaska, Utah and Ohio at 50.2%.

Next up (total population, fully vaccinated according to CDC) are North Carolina 49.8%, Montana at 48.5%, and Indiana 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 9/30/2021 04:34:00 PM

Fannie Mae reported that the Single-Family Serious Delinquency decreased to 1.79% in August, from 1.94% in July. The serious delinquency rate is down from 3.32% in August 2020.

These are mortgage loans that are "three monthly payments or more past due or in foreclosure".

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.

Click on graph for larger image

By vintage, for loans made in 2004 or earlier (1% of portfolio), 4.47% are seriously delinquent (down from 4.82% in July). For loans made in 2005 through 2008 (2% of portfolio), 7.57% are seriously delinquent (down from 8.26%), For recent loans, originated in 2009 through 2021 (97% of portfolio), 1.46% are seriously delinquent (down from 1.57%). So Fannie is still working through a few poor performing loans from the bubble years.

Mortgages in forbearance are counted as delinquent in this monthly report, but they will not be reported to the credit bureaus.

This is very different from the increase in delinquencies following the housing bubble.   Lending standards have been fairly solid over the last decade, and most of these homeowners have equity in their homes - and they will be able to restructure their loans once they are employed.

Freddie Mac reported earlier.

by Calculated Risk on 9/30/2021 03:29:00 PM

The FDIC's official problem bank list is comprised of banks with a CAMELS rating of 4 or 5, and the list is not made public (just the number of banks and assets every quarter). Note: Bank CAMELS ratings are also not made public.

CAMELS is the FDIC rating system, and stands for Capital adequacy, Asset quality, Management, Earnings, Liquidity and Sensitivity to market risk. The scale is from 1 to 5, with 1 being the strongest.

As a substitute for the CAMELS ratings, surferdude808 is using publicly announced formal enforcement actions, and also media reports and company announcements that suggest to us an enforcement action is likely, to compile a list of possible problem banks in the public interest.

DISCLAIMER: This is an unofficial list, the information is from public sources only, and while deemed to be reliable is not guaranteed. No warranty or representation, expressed or implied, is made as to the accuracy of the information contained herein and same is subject to errors and omissions. This is not intended as investment advice. Please contact CR with any errors.

Here are the quarterly changes and a few comments from surferdude808:

Update on the Unofficial Problem Bank List through September 27, 2021. Since the last update at the end of June 2021, the list decreased by six to 59 institutions after two additions and eight removals. Assets increased by $3.1 billion to $54.9 billion, with the change entirely from nearly a $5.0 billion increase from updated asset figures through June 30, 2021. A year ago, the list held 64 institutions with assets of $52.4 billion. Additions this month included The Anna-Jonesboro National Bank, Anna, IL ($268 million) and First Savanna Savings Bank, Savanna, IL ($11 million). Removals because of action termination included Patriot Bank, National Association, Stamford, CT ($963 million); CFSBank, Charleroi, PA ($545 million); Metropolitan Capital Bank & Trust, Chicago, IL ($245 million); South LaFourche Bank & Trust Company, Larose, LA ($145 million); AllNations Bank, Calumet, OK ($48 million); and Sainte Marie State Bank, Sainte Marie, IL ($16 million). Removals through unassisted merger included Jackson County Bank, Black River Falls, WI ($205 million) and Towanda State Bank, Towanda, KS ($11 million). On September 8, 2021, the FDIC released second quarter results and provided an update on the Official Problem Bank List. In that release, the FDIC said there were 51 institutions with assets of $46 billion on the official list, down from the 54 institutions with assets of $55 billion in the first quarter of 2021.

With the conclusion of the second quarter, we bring an updated transition matrix to detail how banks are transitioning off the Unofficial Problem Bank List. Since we first published the Unofficial Problem Bank List on August 7, 2009 with 389 institutions, 1,779 institutions have appeared on a weekly or monthly list since then. Only 3.3 percent of the banks that have appeared on a list remain today as 1,720 institutions have transitioned through the list. Departure methods include 1,014 action terminations, 411 failures, 276 mergers, and 19 voluntary liquidations. Of the 389 institutions on the first published list, only 3 or less than 1.0 percent, still have a troubled designation more than ten years later. The 411 failures represent 23.1 percent of the 1,779 institutions that have made an appearance on the list. This failure rate is well above the 10-12 percent rate frequently cited in media reports on the failure rate of banks on the FDIC's official list.

by Calculated Risk on 9/30/2021 02:10:00 PM

From the Las Vegas Visitor Authority: August 2021 Las Vegas Visitor Statistics

With the Delta variant of the COVID virus spiking during the month, August visitation receded from the pandemic‐era peak in July, coming in at just under 3.0M visitors, down ‐ 9.2% MoM and down ‐16.2% from August 2019.

Hotel occupancy reached 72.8% for the month (down 6.6 pts MoM, down ‐14.9 pts vs. August 2019), as Weekend occupancy remained fairly strong at 87.1% (down ‐1.0 pts MoM) while Midweek occupancy dipped to 67.8% (down ‐6.8 pts MoM).

Although down from July, August ADR was the second highest in the pandemic era, exceeding $140, down ‐7.8% MoM but up 16.0% vs. August 2019. RevPAR came in at $102, ‐15.4% MoM and down ‐3.7% vs. August 2019.

Click on graph for larger image.

Thist graph shows visitor traffic for 2019 (blue), 2020 (orange) and 2021 (red).

Visitor traffic was down 16.2% compared to the same month in 2019.

There had been no convention traffic since March 2020, but there have been a few conventions since June 2021 (data not available yet).

I'll add a graph of convention traffic once convention data is available.

by Calculated Risk on 9/30/2021 10:47:00 AM

Note: The year-over-year occupancy comparisons are easy, since occupancy declined sharply at the onset of the pandemic, so CoStar is comparing to 2019.

From CoStar: STR: US Hotel Occupancy Stays Flat Week Over Week

U.S. hotel occupancy remained relatively flat week over week, while average daily rate rose, according to STR‘s latest data through September 25.

September 19-25, 2021 (percentage change from comparable week in 2019*):

• Occupancy: 63.2% (-11.0%)
• Average daily rate (ADR): $133.69 (-2.0%)
• Revenue per available room (RevPAR): $84.54 (-12.8%)

A week after eclipsing 1 million for the first time since the earliest days of the pandemic, group demand rose again to almost 1.3 million for the week. At the same time, group ADR moved past $200 for the first time since February 2020.
emphasis added

The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.

Click on graph for larger image.

The red line is for 2021, black is 2020, blue is the median, dashed purple is 2019, and dashed light blue is for 2009 (the worst year on record for hotels prior to 2020).

Note: Y-axis doesn't start at zero to better show the seasonal change.

The Summer months had decent occupancy with solid leisure travel, and occupancy was only off about 7% in July and August compared to 2019.

But it is uncertain what will happen over the next couple of months with business travel.  Usually weekly occupancy increases to around 70% in the weeks following Labor Day due to renewed business travel.

by Calculated Risk on 9/30/2021 08:45:00 AM

The DOL reported:

In the week ending September 25, the advance figure for seasonally adjusted initial claims was 362,000, an increase of 11,000 from the previous week's unrevised level of 351,000. The 4-week moving average was 340,000, an increase of 4,250 from the previous week's unrevised average of 335,750.
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 increased to 340,000.

The previous week was unrevised.

Regular state continued claims decreased to 2,802,000 (SA) from 2,820,000 (SA) the previous week.

Note (released with a 2 week delay): There were an additional 1,059,248 receiving Pandemic Unemployment Assistance (PUA) that decreased from 4,896,125 the previous week (there are questions about these numbers). This was a special program for business owners, self-employed, independent contractors or gig workers not receiving other unemployment insurance.  And threre were an additional 991,813 receiving Pandemic Emergency Unemployment Compensation (PEUC) down from 3,644,555.

Weekly claims were higher than the consensus forecast.

by Calculated Risk on 9/30/2021 08:34:00 AM

From the BEA: Gross Domestic Product, (Third Estimate), GDP by Industry, and Corporate Profits (Revised), 2nd Quarter 2021

Real gross domestic product (GDP) increased at an annual rate of 6.7 percent in the second quarter of 2021, according to the "third" estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 6.3 percent.

The "third" estimate of GDP released today is based on more complete source data than were available for the "second" estimate issued last month. In the second estimate, the increase in real GDP was 6.6 percent. Upward revisions to personal consumption expenditures (PCE), exports, and private inventory investment were partly offset by an upward revision to imports, which are a subtraction in the calculation of GDP
emphasis added

Here is a Comparison of Third and Second Estimates. PCE growth was revised up from 11.9% to 12.0%. Residential investment was revised down from -11.5% to -11.7%. This was at the consensus forecast.

by Calculated Risk on 9/29/2021 09:04:00 PM

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released.  The consensus is for 335 thousand initial claims, down from 351 thousand last week.

• Also at 8:30 AM, Gross Domestic Product, 2nd quarter 2021 (Third estimate). The consensus is that real GDP increased 6.7% annualized in Q2, revised up from the second estimate of 6.6%.

• At 9:45 AM, Chicago Purchasing Managers Index for September. The consensus is for a reading of 65.0, down from 66.8 in August.

by Calculated Risk on 9/29/2021 06:31:00 PM

The CDC is the source for all data.

According to the CDC, on Vaccinations.  Total doses administered: 391,992,662, as of a week ago 387,493,716, or 0.75 million doses per day.

COVID Metrics
	Today	Week Ago	Goal
Percent fully Vaccinated	55.9%	54.9%	≥70.0%1
Fully Vaccinated (millions)	185.5	182.4	≥2321
New Cases per Day3	110,232	131,736	≤5,0002
Hospitalized3	74,923	83,786	≤3,0002
Deaths per Day3	1,487	1,508	≤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).  

KUDOS to the residents of the 13 states and D.C. that have achieved 60% of total population fully vaccinated: Vermont at 69.4%, Connecticut, Maine, Rhode Island, Massachusetts, New Jersey, Maryland, New York, New Mexico, New Hampshire, Washington, Oregon, Virginia, and District of Columbia at 60.1%.

The following 21 states have between 50% and 59.9% fully vaccinated: Colorado at 59.3%, California, Minnesota, Hawaii, Pennsylvania, Delaware, Florida, Wisconsin, Texas, Nebraska, Iowa, Illinois, Michigan, Kentucky, South Dakota, Arizona, Kansas, Nevada, Alaska, Utah and Ohio at 50.2%.

Next up (total population, fully vaccinated according to CDC) are North Carolina 49.7%, Montana at 48.4%, and Indiana at 48.3% .

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 9/29/2021 12:19:00 PM

Today, in the Newsletter: Real House Prices, Price-to-Rent Ratio and Price-to-Median Income in July

Excerpt:

This graph uses the year end Case-Shiller house price index - and the nominal median household income through 2020 (from the Census Bureau). 2021 median income is estimated at a 5% annual gain.

By all of the above measures, house prices appear elevated.

by Calculated Risk on 9/29/2021 10:03:00 AM

From the NAR: Pending Home Sales Recover 8.1% in August

Pending home sales rebounded in August, recording significant gains after two prior months of declines, according to the National Association of Realtors®. Each of the four major U.S. regions mounted month-over-month growth in contract activity. However, those same territories reported decreases in transactions year-over-year, with the Northeast being hit hardest, enduring a double-digit drop.

The Pending Home Sales Index (PHSI), a forward-looking indicator of home sales based on contract signings, increased 8.1% to 119.5 in August. Year-over-year, signings dipped 8.3%. An index of 100 is equal to the level of contract activity in 2001.
...
Month-over-month, the Northeast PHSI rose 4.6% to 96.2 in August, a 15.8% drop from a year ago. In the Midwest, the index climbed 10.4% to 115.4 last month, down 5.9% from August 2020.

Pending home sales transactions in the South increased 8.6% to an index of 141.8 in August, down 6.3% from August 2020. The index in the West grew 7.2% in August to 107.0, however still down 9.2% from a year prior.
emphasis added

This was well above expectations of a 1.3% increase for this index. Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in September and October.

by Calculated Risk on 9/29/2021 07:00:00 AM

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

Mortgage applications decreased 1.1 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending September 24, 2021.

... The Refinance Index decreased 1 percent from the previous week and was 0.4 percent higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 1 percent from one week earlier. The unadjusted Purchase Index decreased 2 percent compared with the previous week and was 12 percent lower than the same week one year ago.

“Increased optimism about the strength of the economy pushed Treasury yields higher following last week’s FOMC meeting. Mortgage rates in response rose across all loan types, with the benchmark 30- year fixed rate reaching its highest level since early July 2021,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “The increase in rates – mostly later in the week – led to a decrease in both purchase and refinance applications, with a prominent decline in government loan applications. Conventional loan applications increased, driven by a rise in conventional refinances. This was perhaps a sign that some borrowers reacted to higher rates and decided to refinance.”

Added Kan, “With home-price appreciation continuing to run hot, increasing more than 19 percent annually in July, applications for larger loan amounts continue to outpace lower-balance loans. The average loan size for a purchase application reached $410,000, its highest level since May 2021.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) increased to 3.10 percent from 3.03 percent, with points increasing to 0.34 from 0.30 (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 refinance index since 1990.

With low rates, the index remains elevated.

The second graph shows the MBA mortgage purchase index

According to the MBA, purchase activity is down 12% year-over-year unadjusted.

Note: The year ago comparisons for the unadjusted purchase index are now difficult since purchase activity picked up in late May 2020.

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

by Calculated Risk on 9/28/2021 09:27:00 PM

The CDC is the source for all data. (Cases and Deaths were not updated today).

According to the CDC, on Vaccinations.  Total doses administered: 391,152,574, as of a week ago 386,780,816, or 0.62 million doses per day.

COVID Metrics
	Today	Week Ago	Goal
Percent fully Vaccinated	55.8%	54.8%	≥70.0%1
Fully Vaccinated (millions)	185.3	182.0	≥2321
New Cases per Day3	95,228	134,500	≤5,0002
Hospitalized3	76,251	84,925	≤3,0002
Deaths per Day3	1,332	1,508	≤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).  

KUDOS to the residents of the 13 states and D.C. that have achieved 60% of total population fully vaccinated: Vermont at 69.4%, Connecticut, Maine, Rhode Island, Massachusetts, New Jersey, Maryland, New York, New Mexico, New Hampshire, Washington, Oregon, Virginia, and District of Columbia at 60.0%.

The following 21 states have between 50% and 59.9% fully vaccinated: Colorado at 59.2%, California, Minnesota, Hawaii, Pennsylvania, Delaware, Florida, Wisconsin, Texas, Nebraska, Iowa, Illinois, Michigan, Kentucky, South Dakota, Arizona, Kansas, Nevada, Alaska, Utah and Ohio at 50.1%.

Next up (total population, fully vaccinated according to CDC) are North Carolina 49.6%, Indiana at 48.3% and Montana at 48.3%.

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 9/28/2021 09:00:00 PM

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

• At 10:00 AM, Pending Home Sales Index for August. The consensus is 1.3% increase in the index.

• At 11:45 AM, Discussion, Fed Chair Powell, Policy Panel Discussion, At the European Central Bank Forum on Central Banking

by Calculated Risk on 9/28/2021 07:57:00 PM

The Case-Shiller house price indexes for July were released this morning. Zillow forecasts Case-Shiller a month early, and I like to check the Zillow forecasts since they have been pretty close.

From Matthew Speakman at Zillow: July 2021 Case-Shiller Results & Forecast: Scorching Hot

The slow rise in inventory that marked the beginning of summer wasn’t enough to cool the sizzling market, with the already rapidly rising Case-Shiller indices hitting the gas accelerating into the middle of the year instead of tapping the brakes.
...
Home price growth remained scorching hot as the housing market entered the dog days of summer, but data released in the weeks since indicate cooler days in the months to come. With mortgage rates still near historic lows, competition for the relatively few for-sale homes remain very stiff and home prices continue to rise sharply as a result. But the tight market conditions that have fueled the skyrocketing prices are finally showing signs of loosening. For-sale inventory levels charted their fourth consecutive monthly increase in August, and sellers appear to be taking a less aggressive approach when putting their homes on the market. Annual growth in list prices peaked in the spring and price cuts are becoming more common. And while still-strong price growth continues to present challenging conditions for many would-be buyers, the softening market conditions do appear to be offering some home shoppers a reprieve. Home sales volumes improved in August and applications for home purchase mortgages – a leading indicator of sales activity – has risen in four of the last five week to reach its highest level since April. Price growth remains about as hot as ever, but the housing market is gradually retreating towards a more balanced state.

Monthly and annual growth in August as reported by Case-Shiller is expected to accelerate from July in all three main indices. S&P Dow Jones Indices is expected to release data for the June S&P CoreLogic Case-Shiller Indices on Tuesday, October 26.
emphasis added

The Zillow forecast is for the year-over-year change for the Case-Shiller National index to be at 20.0% in August, from 19.7% in July.

by Calculated Risk on 9/28/2021 04:18:00 PM

A few key points:
1) There is a clear seasonal pattern for house prices.
2) The surge in distressed sales during the housing bust distorted the seasonal pattern.
3) Even though distressed sales are down significantly, the seasonal factor is based on several years of data - and the factor is now closer to normal (second graph below).
4) Still the seasonal index is probably a better indicator of actual price movements than the Not Seasonally Adjusted (NSA) index.

For in depth description of these issues, see Jed Kolko's article from 2014 (currently Chief Economist at Indeed) "Let’s Improve, Not Ignore, Seasonal Adjustment of Housing Data"

Note: I was one of several people to question the change in the seasonal factor (here is a post in 2009) - and this led to S&P Case-Shiller questioning the seasonal factor too (from April 2010).  I still use the seasonal factor (I think it is better than using the NSA data).

Click on graph for larger image.

This graph shows the month-to-month change in the NSA Case-Shiller National index since 1987 (through July 2021). The seasonal pattern was smaller back in the '90s and early '00s, and increased once the bubble burst.

The seasonal swings declined following the bubble, however the recent price surge changed the month-over-month pattern.

The second graph shows the seasonal factors for the Case-Shiller National index since 1987. The factors started to change near the peak of the bubble, and really increased during the bust.   

The swings in the seasonal factors have decreased, and the seasonal factors has been moving back towards more normal levels.

Note that the recent price surge hasn't distorted the seasonal factors.