by Calculated Risk on 12/05/2022 08:00:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Start Lower, But Finish Higher

In addition to Fed anxiety, there was stronger economic data again this morning with a key report on the services sector coming in near the highest levels since earlier this year (a big reversal considering the previous month came in at the lowest levels in more than 2 years).

Strong economic data implies higher rates, all other things being equal. The bond market traded accordingly. By the end of the day, we'd lost enough ground that most mortgage lenders recalled their initial offerings and "re-priced" with higher rates/fees. The net effect was that Monday's rates ended up being close to Friday morning's after having been moderately lower to start the day. [30 year fixed 6.33%]
emphasis added

Tuesday:
• At 8:00 AM: Corelogic House Price index for October.

• At 8:30 AM: Trade Balance report for October from the Census Bureau. The consensus is the trade deficit to be $79.1 billion.  The U.S. trade deficit was at $73.3 billion in September.

by Calculated Risk on 12/05/2022 02:07:00 PM

From BofA:

Overall, today's data pushed up our 4Q US GDP tracking by one-tenth to 1.4% q/q saar. [Dec 5th estimate]
emphasis added

From Goldman:

We left our Q4 GDP tracking estimate unchanged on net at +1.4% (qoq ar). [Dec 5th estimate]

And from the Altanta Fed: GDPNow

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2022 is 2.8 percent on December 1, down from 4.3 percent on November 23. [Dec 1st estimate]

by Calculated Risk on 12/05/2022 11:06:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Black Knight Mortgage Monitor: Home Prices Declined in October; Down 3.2% since June

A brief excerpt:

Here is a graph of the Black Knight HPI. The index is still up 9.3% year-over-year but declined for the fourth straight month in October and is now 3.2% off the peak in June.

• While near multi-decade low affordability would suggest home prices should be seeing strong declines, stalling inventory levels are holding home prices higher than current demand levels would suggest they should be

• Home prices fell 0.43% in October (-0.13% on a seasonally-adjusted basis), the smallest such decline – both actual and seasonally adjusted – since home prices peaked in June

• Likewise, home price growth cooled for the seventh consecutive month, to 9.3% in October from 10.6% the prior month, the lowest annual rate in >2 years

• The median home price nationally is now down 3.2% (-1.5% on a seasonally-adjusted basis) from its June peak but tight inventory has slowed the rate of decline in recent months

There is much more in the article. You can subscribe at https://calculatedrisk.substack.com/

by Calculated Risk on 12/05/2022 10:13:00 AM

(Posted with permission). The ISM® Services index was at 56.5%, up from 54.4% last month. The employment index increased to 51.5%, from 49.1%. Note: Above 50 indicates expansion, below 50 in contraction.

From the Institute for Supply Management: Services PMI® at 56.5% November 2022 Services ISM® Report On Business®

Economic activity in the services sector grew in November for the 30th month in a row — with the Services PMI® registering 56.5 percent — say the nation's purchasing and supply executives in the latest Services ISM® Report On Business®.

The report was issued today by Anthony Nieves, CPSM, C.P.M., A.P.P., CFPM, Chair of the Institute for Supply Management® (ISM®) Services Business Survey Committee: “In November, the Services PMI® registered 56.5 percent, 2.1 percentage points higher than October’s reading of 54.4 percent. The Business Activity Index registered 64.7 percent, a substantial increase of 9 percentage points compared to the reading of 55.7 percent in October. The New Orders Index figure of 56 percent is 0.5 percentage point lower than the October reading of 56.5 percent.
emphasis added

The PMI was higher than expected and the employment index was above 50.

by Calculated Risk on 12/05/2022 09:03:00 AM

Active inventory decreased last week.  Here are the same week inventory changes for the last four years (usually inventory declines seasonally through the Winter):

2022: -14.4K (somewhat smaller than the usual seasonal decrease in inventory)

2021: -24.5K

2020: -18.3K

2019: -24.9K

Altos reports inventory is down 2.6% week-over-week and down 4.8% from the peak on October 28th.

Click on graph for larger image.

This inventory graph is courtesy of Altos Research.

As of December 2nd, inventory was at 549 thousand (7-day average), compared to 564 thousand the prior week. 

Compared to the same week in 2021, inventory is up 56.7% from 350 thousand, and compared to the same week in 2020 inventory is up 14.2% from 481 thousand.  However, compared to 3 years ago (2019), inventory is down 34.1% from 834 thousand.

Here are the inventory milestones I’ve been watching for with the Altos data:

1. The seasonal bottom (happened on March 4, 2022, for Altos) ✅

2. Inventory up year-over-year (happened on May 20, 2022, for Altos) ✅

3. Inventory up compared to 2020 (happened on October 7, 2022, for Altos) ✅

4. Inventory up compared to 2019 (currently down 34.1%).

Here is a graph of the inventory change vs 2021 (milestone 2 above), 2020 (milestone 3) and 2019 (milestone 4).  The blue line is the year-over-year data, the red line is compared to two years ago, and dashed purple is compared to 2019.

A key will be if inventory declines slower than usual during the winter months.

Mike Simonsen discusses this data regularly on Youtube.

by Calculated Risk on 12/05/2022 08:27:00 AM

These indicators are mostly for travel and entertainment.    It was interesting to watch these sectors recover as the pandemic impact subsided.

----- Airlines: Transportation Security Administration -----
The TSA is providing daily travel numbers.

This data is as of December 4th.

Click on graph for larger image.

This data shows the 7-day average of daily total traveler throughput from the TSA for 2019 (Light Blue), 2020 (Black), 2021 (Blue) and 2022 (Red).

The dashed line is the percent of 2019 for the seven-day average.

The 7-day average is 6.9% below the same week in 2019 (93.1% of 2019).  (Dashed line) 

Air travel - as a percent of 2019 - has picked up recently - but still below pre-pandemic levels.

----- Movie Tickets: Box Office Mojo -----
This data shows domestic box office for each week and the median for the years 2016 through 2019 (dashed light blue).  

Black is 2020, Blue is 2021 and Red is 2022.  

The data is from BoxOfficeMojo through December 1st.

Note that the data is usually noisy week-to-week and depends on when blockbusters are released.  

Movie ticket sales were at $115 million last week, down about 57% from the median for the week.

----- Hotel Occupancy: STR -----
This graph shows the seasonal pattern for the hotel occupancy rate using the four-week average.

The red line is for 2022, black is 2020, blue is the median, and dashed light blue is for 2021. Dashed purple is 2019 (STR is comparing to a strong year for hotels).

This data is through Nov 26th. The occupancy rate was down 0.5% compared to the same week in 2019. 

The 4-week average of the occupancy rate is above the median rate for the previous 20 years (Blue) and close to 2019 levels.

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

----- Gasoline Supplied: Energy Information Administration -----

This graph, based on weekly data from the U.S. Energy Information Administration (EIA), shows gasoline supplied compared to the same week of 2019.

Blue is for 2020.  Purple is for 2021, and Red is for 2022.

As of November 25th, gasoline supplied was down 9.6% compared to the same week in 2019.

Recently gasoline supplied has been running below 2019 and 2021 levels - and sometimes below 2020.  

by Calculated Risk on 12/04/2022 10:53:00 PM

Weekend:
• Schedule for Week of December 4, 2022

Monday:
• AT 10:00 AM ET, the ISM Services Index for November.

From CNBC: Pre-Market Data and Bloomberg futures S&P 500 are down 4 and DOW futures are down 16 (fair value).

Oil prices were up over the last week with WTI futures at $80.89 per barrel and Brent at $86.51 per barrel. A year ago, WTI was at $66, and Brent was at $71 - so WTI oil prices are up 23% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $3.36 per gallon. A year ago, prices were at $3.34 per gallon, so gasoline prices are up $0.02 per gallon year-over-year.

by Calculated Risk on 12/04/2022 11:38:00 AM

The BEA released their estimate of vehicle sales for November on Friday.

This graph shows heavy truck sales since 1967 using data from the BEA. The dashed line is the November 2022 seasonally adjusted annual sales rate (SAAR).

Heavy truck sales really collapsed during the great recession, falling to a low of 180 thousand SAAR in May 2009.  Then heavy truck sales increased to a new all-time high of 570 thousand SAAR in April 2019.

Click on graph for larger image.

Note: "Heavy trucks - trucks more than 14,000 pounds gross vehicle weight."

Heavy truck sales declined sharply at the beginning of the pandemic, falling to a low of 308 thousand SAAR in May 2020.  

Heavy truck sales were at 489 thousand SAAR in November, down from 492 thousand in October, and up 11.4% from 439 thousand SAAR in November 2021.  

Usually, heavy truck sales decline sharply prior to a recession.   Sales were solid in November.

by Calculated Risk on 12/03/2022 02:11:00 PM

At the Calculated Risk Real Estate Newsletter this week:

• Inflation Adjusted House Prices 3.3% Below Peak

• Rents Falling Faster than "Seasonality Alone"

• FHFA Announces Baseline Conforming Loan Limit Will Increase to $726,200

• Case-Shiller: National House Price Index "Continued to Decline" to 10.6% year-over-year increase in September

• Join the CalculatedRisk subscriber chat

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

You can subscribe at https://calculatedrisk.substack.com/

Most content is available for free (and no Ads), but please subscribe!

by Calculated Risk on 12/03/2022 08:11:00 AM

The key economic report this week is the October trade deficit.

----- Monday, December 5th -----
10:00 AM: the ISM Services Index for November.

----- Tuesday, December 6th -----
8:00 AM: Corelogic House Price index for October.

8:30 AM: Trade Balance report for October from the Census Bureau.

This graph shows the U.S. trade deficit, with and without petroleum, through the most recent report. 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.

The consensus is the trade deficit to be $79.1 billion.  The U.S. trade deficit was at $73.3 billion in September.

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

----- Thursday, December 8th -----
8:30 AM: The initial weekly unemployment claims report will be released.  The consensus is for 230 thousand initial claims, up from 225 thousand last week.

----- Friday, December 9th -----
8:30 AM: The Producer Price Index for November from the BLS. The consensus is for a 0.3% increase in PPI, and a 0.2% increase in core PPI.

12:00 PM: Q3 Flow of Funds Accounts of the United States from the Federal Reserve.

10:00 AM: University of Michigan's Consumer sentiment index (Preliminary for December).

by Calculated Risk on 12/02/2022 08:46:00 PM

NOTE: This was a holiday week, and cases and deaths reporting always declines during holiday weeks.

On COVID (focus on hospitalizations and deaths).  Data has switched to weekly.

Weekly deaths bottomed in July 2021 at 1,666.

COVID Metrics
	Now	Week Ago	Goal
New Cases per Week2	303,101	306,856	≤35,0001
Hospitalized2🚩	25,603	22,011	≤3,0001
Deaths per Week2	1,780	2,634	≤3501
1my goals to stop weekly posts, 2Weekly for Cases, Currently Hospitalized, and Deaths 🚩 Increasing number weekly for Cases, Hospitalized, and Deaths ✅ Goal met.

Click on graph for larger image.

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

by Calculated Risk on 12/02/2022 03:09:00 PM

From CoStar: STR: US Hotel Performance Falls as Expected Over Thanksgiving Week

Due to the Thanksgiving holiday, U.S. hotel performance came in lower than the previous week and showed mixed comparisons to 2019, according to STR‘s latest data through Nov. 26.

Nov. 20-26, 2022 (percentage change from comparable week in 2019*

• Occupancy: 50.4% (-0.5%)
• Average daily rate (ADR): US$135.49 (+20.4%)
• Revenue per available room (RevPAR): US$68.27 (+19.9%)

*Due to the pandemic impact, STR is measuring recovery against comparable time periods from 2019.
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 2022, black is 2020, blue is the median, and dashed light blue is for 2021.  Dashed purple is 2019 (STR is comparing to a strong year for hotels).

The 4-week average of the occupancy rate is above the median rate for the previous 20 years (Blue) and close to 2019 levels.

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

The 4-week average of the occupancy rate continue to decline into the Winter.

by Calculated Risk on 12/02/2022 01:44:00 PM

Realtor.com has monthly and weekly data on the existing home market. Here is their weekly report released today from Chief Economist Danielle Hale: Weekly Housing Trends View — Data Week Ending Nov 26, 2022. Note: They have data on list prices, new listings and more, but this focus is on inventory.

• Active inventory continued to grow, increasing 53% above one year ago. Inventory accelerated again, notching a seventh week in a row with yearly trend growth roughly at or above 2% higher than the previous week.
...
• New listings–a measure of sellers putting homes up for sale–were again down, dropping 17% from one year ago. This marks the twenty-first consecutive week of year-over-year declines in homeowners listing their home for sale.

Here is a graph of the year-over-year change in inventory according to realtor.com. 

Note the rapid increase in the YoY change earlier this year, from down 30% at the beginning of the year, to up 29% YoY at the beginning of July.

Then the Realtor.com data was stuck at up around 26% to 30% YoY for 14 weeks in a row.  This was due to the slowdown in new listings, even as sales had fallen sharply.

Now YoY inventory is increasing again with even higher mortgage rates, suggesting sales are off more than new listings.

by Calculated Risk on 12/02/2022 09:33:00 AM

The headline jobs number in the November employment report was above expectations, however employment for the previous two months was revised down by 23,000, combined.   The participation rate decreased, and the unemployment rate was unchanged at 3.7%.  

Leisure and hospitality gained 88 thousand jobs in November.  At the beginning of the pandemic, in March and April of 2020, leisure and hospitality lost 8.2 million jobs, and are now down 980 thousand jobs since February 2020.  So, leisure and hospitality has now added back about 88% all of the jobs lost in March and April 2020. 

Construction employment increased 20 thousand and is now 126 thousand above the pre-pandemic level. 

Manufacturing added 14 thousand jobs and is now 149 thousand above the pre-pandemic level.

Earlier: November Employment Report: 263 thousand Jobs, 3.7% Unemployment Rate

In November, the year-over-year employment change was 4.90 million jobs.

Seasonal Retail Hiring

Typically, retail companies start hiring for the holiday season in October, and really increase hiring in November. Here is a graph that shows the historical net retail jobs added for October, November and December by year.

This graph really shows the collapse in retail hiring in 2008. Since then, seasonal hiring had increased back close to more normal levels. Note: I expect the long-term trend will be down with more and more internet holiday shopping.

Retailers hired 257 thousand workers Not Seasonally Adjusted (NSA) net in November.  

This was seasonally adjusted (SA) to a loss of 29.9 thousand jobs in November.

Prime (25 to 54 Years Old) Participation

Since the overall participation rate is impacted by both cyclical (recession) and demographic (aging population, younger people staying in school) reasons, here is the employment-population ratio for the key working age group: 25 to 54 years old.

The 25 to 54 participation rate decreased in November to 82.4% from 82.5% in October, and the 25 to 54 employment population ratio decreased to 79.7% from 79.8% the previous month.

Both have declined recently - but both are close to the pre-pandemic levels and indicate almost all of the prime age workers have returned to the labor force.

Part Time for Economic Reasons

From the BLS report:

"The number of persons employed part time for economic reasons was about unchanged at 3.7 million in November. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs."

The number of persons working part time for economic reasons increased in November to 3.685 million from 3.660 million in October. This is below pre-recession levels and near the fewest part time workers (for economic reasons) in over 20 years.

These workers are included in the alternate measure of labor underutilization (U-6) that decreased to 6.7% from 6.8% in the previous month. This is down from the record high in April 22.9% and ties the lowest level on record (series started in 1994). This measure is below the level in February 2020 (pre-pandemic).

Unemployed over 26 Weeks

This graph shows the number of workers unemployed for 27 weeks or more.

According to the BLS, there are 1.230 million workers who have been unemployed for more than 26 weeks and still want a job, up from 1.165 million the previous month.

This is close to pre-pandemic levels.

Summary:

The headline monthly jobs number was above expectations; however, employment for the previous two months was revised down by 23,000, combined.  

The headline unemployment rate was unchanged at 3.7%, and U-6 declined to tie a record low at 6.7%.

Overall, this was another solid employment report.

by Calculated Risk on 12/02/2022 08:44:00 AM

From the BLS:

Total nonfarm payroll employment increased by 263,000 in November, and the unemployment rate was unchanged at 3.7 percent, the U.S. Bureau of Labor Statistics reported today. Notable job gains occurred in leisure and hospitality, health care, and government. Employment declined in retail trade and in transportation and warehousing.
...
The change in total nonfarm payroll employment for September was revised down by 46,000, from +315,000 to +269,000, and the change for October was revised up by 23,000, from +261,000 to +284,000. With these revisions, employment gains in September and October combined were 23,000 lower than previously reported.
emphasis added

Click on graph for larger image.

The first graph shows the job losses from the start of the employment recession, in percentage terms.

The current employment recession was by far the worst recession since WWII in percentage terms.

However, as of August 2022, the total number of jobs had returned and are now 1.044 million above pre-pandemic levels. I'll post this graph through the January 2023 report (includes the annual revision).

The second graph shows the year-over-year change in total non-farm employment since 1968.

In November, the year-over-year change was 4.90 million jobs.  Employment was up significantly year-over-year.

Total payrolls increased by 263 thousand in November.  Private payrolls increased by 221 thousand, and public payrolls increased 42 thousand.

Payrolls for September and October were revised down 23 thousand, combined.

The third graph shows the employment population ratio and the participation rate.

The Labor Force Participation Rate decreased to 62.1% in November, from 62.2% in October. This is the percentage of the working age population in the labor force.

The Employment-Population ratio decreased to 59.9% from 60.0% (blue line).

I'll post the 25 to 54 age group employment-population ratio graph later.

The fourth graph shows the unemployment rate.

The unemployment rate was unchanged in November at 3.7% from 3.7% in October.

This was above consensus expectations; however, September and October payrolls were revised down by 23,000 combined.  

I'll have more later ...

by Calculated Risk on 12/01/2022 09:08:00 PM

Mortgage rates are down a full percentage point in just over 3 weeks.

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

My November Employment Preview

Friday:
• At 8:30 AM ET, Employment Report for November.   The consensus is for 200,000 jobs added, and for the unemployment rate to be unchanged at 3.7%.

by Calculated Risk on 12/01/2022 07:24:00 PM

Wards Auto released their estimate of light vehicle sales for November. Wards Auto estimates sales of 14.14 million SAAR in November 2022 (Seasonally Adjusted Annual Rate), down 5.1% from the October sales rate, and up 7.9% from November 2021. 

Click on graph for larger image.

This graph shows light vehicle sales since 2006 from the BEA (blue) and Wards Auto's estimate for November (red).

The impact of COVID-19 was significant, and April 2020 was the worst month.  After April 2020, sales increased, and were close to sales in 2019 (the year before the pandemic).  However, sales decreased late last year due to supply issues.  It appears the "supply chain bottom" was in September 2021.

The second graph shows light vehicle sales since the BEA started keeping data in 1967.

Sales in November were below the consensus forecast of 14.9 million SAAR.

by Calculated Risk on 12/01/2022 06:08:00 PM

On Friday at 8:30 AM ET, the BLS will release the employment report for November. The consensus is for 200,000 jobs added, and for the unemployment rate to be unchanged at 3.7%.

There were 261,000 jobs added in October, and the unemployment rate was at 3.7%.

Click on graph for larger image.

• First, as of October there are 804 thousand more jobs than in February 2020 (the month before the pandemic).

This graph shows the job losses from the start of the employment recession, in percentage terms.  As of August 2022, the total number of jobs had returned.

This doesn't include the preliminary benchmark revision that showed there were 462 thousand more jobs than originally reported in March 2022.

• A few brief excerpts from a note by Goldman Sachs economist Spencer Hill:

We estimate nonfarm payrolls rose by 175k in November (mom sa), below consensus of +200k and a slowdown from the +261k pace in October. ... We estimate the unemployment rate was unchanged at 3.7%
emphasis added

• ADP Report: The ADP employment report showed 127,000 private sector jobs were added in November.  This is the fourth release of ADP's new methodology, and this suggests job gains below consensus expectations.

• ISM Surveys: Note that the ISM services are diffusion indexes based on the number of firms hiring (not the number of hires).  The ISM® manufacturing employment index decreased in November to 48.4%, down from 50.0% last month.   This would suggest 30,000 jobs lost in manufacturing.

The ISM® services employment index for November has not been released yet.

• Unemployment Claims: The weekly claims report showed an increase in the number of initial unemployment claims during the reference week (includes the 12th of the month) from 214,000 in October to 223,000 in November. This would usually suggest above the same number of layoffs in October as in September. In general, weekly claims were slightly higher than expectations in November.

•  COVID: As far as the pandemic, the number of weekly cases during the reference week in November was around 282,000, up slightly from 265,000 in October.  

• Conclusion: The consensus is for job growth to slow to 200,000 jobs added in November.  The ADP report was below expectations, and weekly claims were slightly negative.  My guess is the report will be below consensus.

by Calculated Risk on 12/01/2022 03:09:00 PM

Fannie Mae reported that the Single-Family Serious Delinquency decreased to 0.67% in October from 0.69% in September. The serious delinquency rate is down from 1.46% in October 2021.  This is close to pre-pandemic levels.

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), 2.34% are seriously delinquent (down from 2.41% in September). 

For loans made in 2005 through 2008 (1% of portfolio), 3.71% are seriously delinquent (down from 3.83%), 

 For recent loans, originated in 2009 through 2021 (98% of portfolio), 0.53% are seriously delinquent (down from 0.55%). So, Fannie is still working through a handful of poor performing loans from the bubble years.

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

Freddie Mac reported earlier.

by Calculated Risk on 12/01/2022 12:16:00 PM

Today, in the Calculated Risk Real Estate Newsletter: Rents Falling Faster than "Seasonality Alone"

A brief excerpt:

Here is a graph of the year-over-year (YoY) change for these measures since January 2015. All of these measures are through October 2022 (Apartment List through November 2022).

Note that new lease measures (Zillow, Apartment List) dipped early in the pandemic, whereas the BLS measures were steady. Then new leases took off, and the BLS measures are picking up.
...
The Zillow measure is up 9.6% YoY in October, down from 10.8% YoY in September. This is down from a peak of 17.1% YoY in February.

The ApartmentList measure is up 4.5% YoY as of November, down from 5.6% in October. This is down from the peak of 18.1% YoY last December.

Rents are still increasing YoY, and we should expect this to continue to spill over into measures of inflation. The Owners’ Equivalent Rent (OER) was up 6.9% YoY in October, from 6.7% YoY in September - and will likely increase further in the coming months even as rents slow sharply.
...
My suspicion is rent increases will slow further over the coming months as the pace of household formation slows, and more supply comes on the market. Housing economist Tom Lawler recently wrote: "An actual decline in rents next year would be a reasonable base case". This is important for monetary policy.

There is much more in the article. You can subscribe at https://calculatedrisk.substack.com/