Connect with us

Uncategorized

Housing Market Tracker: Purchase apps jump 25%

Last week’s housing market data provided mixed news, but the year-over-year purchase app numbers were the big story.

Published

1 year ago

on

Here’s the housing market rundown for the last week:

  • Purchase application data had a solid week-to-week gain of 25%. That’s a big jump, but context is critical. 
  • Housing inventory decreased by 566 units, which is not a significant decline.
  • Mortgage rates fell, but the bond market didn’t break what I see as a critical level, so for now, stabilization is more important.

Last week’s housing market data provided mixed news. Purchase application data had a solid week-to-week print of 25% growth, but the more valuable metric is that the year-over-year declines were the lowest in many months. Mortgage rates ended the week at 6.15%, but the 10-year yield didn’t break the critical level I was looking for and reversed higher on Friday. 

Weekly housing inventory fell, but not by much. I want to see total inventory back at the 2019 level — this would mean NAR data breaking above 1.52 million. In the last existing home sales report, we hit 970,000. I believe we can have a more functioning housing market if inventory rises to that level, but we still have a long way to go. We don’t want inventory to stall during this time of the year; it should grow into spring.

Purchase application data

Last week we saw a big jump in purchase application data of 25% week over week. Normally this would be epic news because we rarely see 25% week-over-week growth. However, we need to remember that we just started the period of seasonal growth, which runs from the second week of January through the first week of May, so context is always critical. 

The more important data for me was that the year-over-year decline in purchase application data was the lowest in months. The key with application data is to read the internals, especially after a waterfall dive in demand, to see when a bottom is forming.

Since Nov. 9, this data has been improving, a fact that has quietly slipped past most people because so much of the focus was on falling home prices. The internal data was starting to show a bottom forming while mortgage rates were falling.

This data line has not had a positive year-over-year print since May 19, 2021. COVID-19 has done a number on this data line, so a lot of adjustments need to be made to understand it better. 

The year-over-year purchase application data is the most important because that is the new volume growth. Since we are working from the mother of all low bars, any change we might see this year needs context. However, considering mortgage rates haven’t cracked below 6% yet, it’s encouraging to see a stabilization forming with rates between 6.04% – 7%.

We want to focus on this data from now until the first week of May. After May, total volumes always fall. Don’t forget that purchase application data looks out 30-90 days at minimum, so it will take time for the sales data to reflect what’s happening here. For now, consider this just stabilization.


Weekly housing inventory

The downside of the past week is that weekly housing inventory declined slightly. However, I will look at the bright side and say that the past two weeks have seen a stabilizing of inventory. The Altos Research weekly housing inventory data shows that two weeks ago, inventory grew by 1,339 units and then declined by 566 units last week. Hopefully, we will see the traditional rise in inventory for the spring faster than we saw last year.

  • Weekly inventory change (Jan. 13 -Jan. 20, 2023): Fell From 472,688  to 472,122
  • Same week last year (Jan. 14-Jan. 21, 2022): Fell from 283,656 to 276,865

In June, I predicted that as long as mortgage rates stayed high, weakness in demand over time could create more inventory, and we could get back to 2019 levels of inventory in 2023, meaning inventory breaks over 1.52 million.



One week after that prediction, the new listing data declined faster and earlier than usual. By December, this led to total inventory levels breaking under 1 million. Even getting inventory back to 2019 levels would still mean total housing inventory was historically low.

As days on market grow, more houses will naturally stay on the market longer, which can increase total inventory levels, similar to what we saw last year. However, it’s going to be tough getting above 1.52 million active listings if new listing data declines in 2023.

As you can see below in the NAR total inventory data for 2022, Inventory grows each year during the spring and summer, then traditionally declines in the fall and winter.

Given the seasonality factor, it’s very important that we get traditional new listing growth every year to keep the housing market working as normal. In 2020, due to COVID-19, and then again in 2022, due to much higher mortgage rates, new listing data fell noticeably, which is a sign of an unhealthy housing market.

In 2020, new listing data came back fast as people grew comfortable listing their homes during COVID-19. Now, it’s about mortgage rates and affordability, not a global pandemic.

10-year yield and mortgage rates

Last week, mortgage rates headed lower to a short-term low of 6.04%. However, the bond market guy in me just saw a test of a critical level fail, and the yield reversed higher by Friday. Mortgage rates ended the week at 6.15%. 

Part of my 2023 forecast for the 10-year yield is that if the economy stays firm, the 10-year yield range should be between 3.21%-4.25%, meaning mortgage rates between 5.75%-7.25%. With economic weakness, bond yields could quickly get down to 2.72%, which could take mortgage rates near 5%.

Right now the economic data is still firm, and jobless claims are still low, even though January isn’t the best month to take jobless claims data too seriously. All in all, the first few weeks of the year look about right to me for the housing market.

The marketplace believes the Federal Reserve rate hikes are almost done, and they should be cutting rates toward the end of the year. The Fed wants to do two or three more 0.25% rate hikes and call it quits. I think the Fed should just call it quits — this way, you have a better shot at keeping short-term rates higher for longer. 

The week ahead

Today, the Conference Board released its leading economic index, a key tracker for all market participants, and it hasn’t been showing bullish economic trends for a while now. In July, I presented my six recession red flag model to the Conference Board right before I raised my sixth recession red flag based on the index.

Other important housing market reports this week will be durable good orders, new home sales and pending home sales. Pending home sales will be interesting since a lot of recent housing data has been positive. This might be the last pending home sales report that doesn’t account for the better purchase application data — it might be one month too early. However, we could see a tiny bounce off the bottom. We’ll know on Friday.

As always, keep an eye out on jobless claims Thursday morning. The last few weeks have been good in this data line as it’s been trending down. Last week, the headline jobless claims data broke under 200,000 again, down to 190,000, showing how solid the labor market is.

Just remember, when you see a lot of layoff announcements, this doesn’t necessarily mean people file for unemployment claims right away. Especially when it comes to layoffs in tech companies, those might need more time to filter into the system.

My Fed pivot model needs jobless claims to break over 323,000 on a four-week moving average. As you can see below, we are nowhere close to that, but the bond market should get ahead of the Fed before the turn.

Overall, last week’s data was good, but not great, for the housing market. I would like to have seen the inventory grow, not decline, but I will take a slight decline as a small victory. The 10-year yield not breaking that critical level isn’t too shocking, but seeing that level get a good test was exciting.

Purchase apps had a significant week-to-week gain, but remember, context is critical with this data line; we want to take this one week at a time and read the data line correctly and not overhype anything too much.

Read More

Related Topics:
Continue Reading

Uncategorized

February Employment Situation

By Paul Gomme and Peter Rupert The establishment data from the BLS showed a 275,000 increase in payroll employment for February, outpacing the 230,000…

Published

20 hours ago

on

March 9, 2024

By

By Paul Gomme and Peter Rupert

The establishment data from the BLS showed a 275,000 increase in payroll employment for February, outpacing the 230,000 average over the previous 12 months. The payroll data for January and December were revised down by a total of 167,000. The private sector added 223,000 new jobs, the largest gain since May of last year.

Temporary help services employment continues a steep decline after a sharp post-pandemic rise.

Average hours of work increased from 34.2 to 34.3. The increase, along with the 223,000 private employment increase led to a hefty increase in total hours of 5.6% at an annualized rate, also the largest increase since May of last year.

The establishment report, once again, beat “expectations;” the WSJ survey of economists was 198,000. Other than the downward revisions, mentioned above, another bit of negative news was a smallish increase in wage growth, from $34.52 to $34.57.

The household survey shows that the labor force increased 150,000, a drop in employment of 184,000 and an increase in the number of unemployed persons of 334,000. The labor force participation rate held steady at 62.5, the employment to population ratio decreased from 60.2 to 60.1 and the unemployment rate increased from 3.66 to 3.86. Remember that the unemployment rate is the number of unemployed relative to the labor force (the number employed plus the number unemployed). Consequently, the unemployment rate can go up if the number of unemployed rises holding fixed the labor force, or if the labor force shrinks holding the number unemployed unchanged. An increase in the unemployment rate is not necessarily a bad thing: it may reflect a strong labor market drawing “marginally attached” individuals from outside the labor force. Indeed, there was a 96,000 decline in those workers.

Earlier in the week, the BLS announced JOLTS (Job Openings and Labor Turnover Survey) data for January. There isn’t much to report here as the job openings changed little at 8.9 million, the number of hires and total separations were little changed at 5.7 million and 5.3 million, respectively.

As has been the case for the last couple of years, the number of job openings remains higher than the number of unemployed persons.

Also earlier in the week the BLS announced that productivity increased 3.2% in the 4th quarter with output rising 3.5% and hours of work rising 0.3%.

The bottom line is that the labor market continues its surprisingly (to some) strong performance, once again proving stronger than many had expected. This strength makes it difficult to justify any interest rate cuts soon, particularly given the recent inflation spike.

Read More

Continue Reading

Uncategorized

Mortgage rates fall as labor market normalizes

Jobless claims show an expanding economy. We will only be in a recession once jobless claims exceed 323,000 on a four-week moving average.

Published

1 day ago

on

March 8, 2024

By

Everyone was waiting to see if this week’s jobs report would send mortgage rates higher, which is what happened last month. Instead, the 10-year yield had a muted response after the headline number beat estimates, but we have negative job revisions from previous months. The Federal Reserve’s fear of wage growth spiraling out of control hasn’t materialized for over two years now and the unemployment rate ticked up to 3.9%. For now, we can say the labor market isn’t tight anymore, but it’s also not breaking.

The key labor data line in this expansion is the weekly jobless claims report. Jobless claims show an expanding economy that has not lost jobs yet. We will only be in a recession once jobless claims exceed 323,000 on a four-week moving average.

From the Fed: In the week ended March 2, initial claims for unemployment insurance benefits were flat, at 217,000. The four-week moving average declined slightly by 750, to 212,250


Below is an explanation of how we got here with the labor market, which all started during COVID-19.

1. I wrote the COVID-19 recovery model on April 7, 2020, and retired it on Dec. 9, 2020. By that time, the upfront recovery phase was done, and I needed to model out when we would get the jobs lost back.

2. Early in the labor market recovery, when we saw weaker job reports, I doubled and tripled down on my assertion that job openings would get to 10 million in this recovery. Job openings rose as high as to 12 million and are currently over 9 million. Even with the massive miss on a job report in May 2021, I didn’t waver.

Currently, the jobs openings, quit percentage and hires data are below pre-COVID-19 levels, which means the labor market isn’t as tight as it once was, and this is why the employment cost index has been slowing data to move along the quits percentage.  

2-US_Job_Quits_Rate-1-2

3. I wrote that we should get back all the jobs lost to COVID-19 by September of 2022. At the time this would be a speedy labor market recovery, and it happened on schedule, too

Total employment data

4. This is the key one for right now: If COVID-19 hadn’t happened, we would have between 157 million and 159 million jobs today, which would have been in line with the job growth rate in February 2020. Today, we are at 157,808,000. This is important because job growth should be cooling down now. We are more in line with where the labor market should be when averaging 140K-165K monthly. So for now, the fact that we aren’t trending between 140K-165K means we still have a bit more recovery kick left before we get down to those levels. 




From BLS: Total nonfarm payroll employment rose by 275,000 in February, and the unemployment rate increased to 3.9 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in health care, in government, in food services and drinking places, in social assistance, and in transportation and warehousing.

Here are the jobs that were created and lost in the previous month:

IMG_5092

In this jobs report, the unemployment rate for education levels looks like this:

  • Less than a high school diploma: 6.1%
  • High school graduate and no college: 4.2%
  • Some college or associate degree: 3.1%
  • Bachelor’s degree or higher: 2.2%
IMG_5093_320f22

Today’s report has continued the trend of the labor data beating my expectations, only because I am looking for the jobs data to slow down to a level of 140K-165K, which hasn’t happened yet. I wouldn’t categorize the labor market as being tight anymore because of the quits ratio and the hires data in the job openings report. This also shows itself in the employment cost index as well. These are key data lines for the Fed and the reason we are going to see three rate cuts this year.

Read More

Continue Reading

Uncategorized

Inside The Most Ridiculous Jobs Report In History: Record 1.2 Million Immigrant Jobs Added In One Month

Inside The Most Ridiculous Jobs Report In History: Record 1.2 Million Immigrant Jobs Added In One Month

Last month we though that the January…

Published

1 day ago

on

March 8, 2024

By

Inside The Most Ridiculous Jobs Report In History: Record 1.2 Million Immigrant Jobs Added In One Month

Last month we though that the January jobs report was the "most ridiculous in recent history" but, boy, were we wrong because this morning the Biden department of goalseeked propaganda (aka BLS) published the February jobs report, and holy crap was that something else. Even Goebbels would blush. 

What happened? Let's take a closer look.

On the surface, it was (almost) another blockbuster jobs report, certainly one which nobody expected, or rather just one bank out of 76 expected. Starting at the top, the BLS reported that in February the US unexpectedly added 275K jobs, with just one research analyst (from Dai-Ichi Research) expecting a higher number.

Some context: after last month's record 4-sigma beat, today's print was "only" 3 sigma higher than estimates. Needless to say, two multiple sigma beats in a row used to only happen in the USSR... and now in the US, apparently.

Before we go any further, a quick note on what last month we said was "the most ridiculous jobs report in recent history": it appears the BLS read our comments and decided to stop beclowing itself. It did that by slashing last month's ridiculous print by over a third, and revising what was originally reported as a massive 353K beat to just 229K,  a 124K revision, which was the biggest one-month negative revision in two years!

Of course, that does not mean that this month's jobs print won't be revised lower: it will be, and not just that month but every other month until the November election because that's the only tool left in the Biden admin's box: pretend the economic and jobs are strong, then revise them sharply lower the next month, something we pointed out first last summer and which has not failed to disappoint once.

To be fair, not every aspect of the jobs report was stellar (after all, the BLS had to give it some vague credibility). Take the unemployment rate, after flatlining between 3.4% and 3.8% for two years - and thus denying expectations from Sahm's Rule that a recession may have already started - in February the unemployment rate unexpectedly jumped to 3.9%, the highest since February 2022 (with Black unemployment spiking by 0.3% to 5.6%, an indicator which the Biden admin will quickly slam as widespread economic racism or something).

And then there were average hourly earnings, which after surging 0.6% MoM in January (since revised to 0.5%) and spooking markets that wage growth is so hot, the Fed will have no choice but to delay cuts, in February the number tumbled to just 0.1%, the lowest in two years...

... for one simple reason: last month's average wage surge had nothing to do with actual wages, and everything to do with the BLS estimate of hours worked (which is the denominator in the average wage calculation) which last month tumbled to just 34.1 (we were led to believe) the lowest since the covid pandemic...

... but has since been revised higher while the February print rose even more, to 34.3, hence why the latest average wage data was once again a product not of wages going up, but of how long Americans worked in any weekly period, in this case higher from 34.1 to 34.3, an increase which has a major impact on the average calculation.

While the above data points were examples of some latent weakness in the latest report, perhaps meant to give it a sheen of veracity, it was everything else in the report that was a problem starting with the BLS's latest choice of seasonal adjustments (after last month's wholesale revision), which have gone from merely laughable to full clownshow, as the following comparison between the monthly change in BLS and ADP payrolls shows. The trend is clear: the Biden admin numbers are now clearly rising even as the impartial ADP (which directly logs employment numbers at the company level and is far more accurate), shows an accelerating slowdown.

But it's more than just the Biden admin hanging its "success" on seasonal adjustments: when one digs deeper inside the jobs report, all sorts of ugly things emerge... such as the growing unprecedented divergence between the Establishment (payrolls) survey and much more accurate Household (actual employment) survey. To wit, while in January the BLS claims 275K payrolls were added, the Household survey found that the number of actually employed workers dropped for the third straight month (and 4 in the past 5), this time by 184K (from 161.152K to 160.968K).

This means that while the Payrolls series hits new all time highs every month since December 2020 (when according to the BLS the US had its last month of payrolls losses), the level of Employment has not budged in the past year. Worse, as shown in the chart below, such a gaping divergence has opened between the two series in the past 4 years, that the number of Employed workers would need to soar by 9 million (!) to catch up to what Payrolls claims is the employment situation.

There's more: shifting from a quantitative to a qualitative assessment, reveals just how ugly the composition of "new jobs" has been. Consider this: the BLS reports that in February 2024, the US had 132.9 million full-time jobs and 27.9 million part-time jobs. Well, that's great... until you look back one year and find that in February 2023 the US had 133.2 million full-time jobs, or more than it does one year later! And yes, all the job growth since then has been in part-time jobs, which have increased by 921K since February 2023 (from 27.020 million to 27.941 million).

Here is a summary of the labor composition in the past year: all the new jobs have been part-time jobs!

But wait there's even more, because now that the primary season is over and we enter the heart of election season and political talking points will be thrown around left and right, especially in the context of the immigration crisis created intentionally by the Biden administration which is hoping to import millions of new Democratic voters (maybe the US can hold the presidential election in Honduras or Guatemala, after all it is their citizens that will be illegally casting the key votes in November), what we find is that in February, the number of native-born workers tumbled again, sliding by a massive 560K to just 129.807 million. Add to this the December data, and we get a near-record 2.4 million plunge in native-born workers in just the past 3 months (only the covid crash was worse)!

The offset? A record 1.2 million foreign-born (read immigrants, both legal and illegal but mostly illegal) workers added in February!

Said otherwise, not only has all job creation in the past 6 years has been exclusively for foreign-born workers...

Source: St Louis Fed FRED Native Born and Foreign Born

... but there has been zero job-creation for native born workers since June 2018!

This is a huge issue - especially at a time of an illegal alien flood at the southwest border...

... and is about to become a huge political scandal, because once the inevitable recession finally hits, there will be millions of furious unemployed Americans demanding a more accurate explanation for what happened - i.e., the illegal immigration floodgates that were opened by the Biden admin.

Which is also why Biden's handlers will do everything in their power to insure there is no official recession before November... and why after the election is over, all economic hell will finally break loose. Until then, however, expect the jobs numbers to get even more ridiculous.

Tyler Durden Fri, 03/08/2024 - 13:30

Read More

Continue Reading

Trending