by Calculated Risk on 4/02/2025 07:34:00 PM

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

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released. The consensus is for 225 initial claims up from 224 thousand last week.

• Also at 8:30 AM, Trade Balance report for February from the Census Bureau. The consensus is the trade deficit to be $110.0 billion.  The U.S. trade deficit was at $131.4 billion in January.

• At 10:00 AM, the ISM Services Index for March.

Weekly Schedule

by Calculated Risk on 4/02/2025 05:38:00 PM

From the Philly Fed:

The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for January 2025. Over the past three months, the indexes increased in 47 states, decreased in one state, and remained stable in two, for a three-month diffusion index of 92. Additionally, in the past month, the indexes increased in 35 states, decreased in nine states, and remained stable in six, for a one-month diffusion index of 52. For comparison purposes, the Philadelphia Fed has also developed a similar coincident index for the entire United States. The Philadelphia Fed’s U.S. index increased 0.6 percent over the past three months and 0.2 percent in January.
emphasis added

Note: These are coincident indexes constructed from state employment data. An explanation from the Philly Fed:

The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing by production workers, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average). The trend for each state’s index is set to the trend of its gross domestic product (GDP), so long-term growth in the state’s index matches long-term growth in its GDP.

Click on map for larger image.

Here is a map of the three-month change in the Philly Fed state coincident indicators. This map was all red during the worst of the Pandemic and also at the worst of the Great Recession.

The map is mostly positive on a three-month basis.

Source: Philly Fed.

And here is a graph is of the number of states with one month increasing activity according to the Philly Fed. 

This graph includes states with minor increases (the Philly Fed lists as unchanged).

In January, 36 states had increasing activity including minor increases.

by Calculated Risk on 4/02/2025 01:16:00 PM

This graph shows heavy truck sales since 1967 using data from the BEA. The dashed line is the March 2025 seasonally adjusted annual sales rate (SAAR) of 403 thousand.

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 record 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 288 thousand SAAR in May 2020.  

Heavy truck sales were at 403 thousand SAAR in March, down from 436 thousand in February, and down 12.1% from 459 thousand SAAR in February 2025.  

Year-to-date (NSA) sales are down 10.1%.

Usually, heavy truck sales decline sharply prior to a recession. Perhaps heavy truck sales will be revised up, but this was somewhat weak.

As I mentioned yesterday, light vehicle sales "surged" in March to 17.77 million SAAR as some buyers rushed to beat the tariffs.

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

Light vehicle sales were at 17.77 million SAAR in March, up 11.0% from February, and up 13.3% from March 2024.

by Calculated Risk on 4/02/2025 09:51:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Moody's: Q1 2025 Apartment Vacancy Rate Highest Since 2010; Office Vacancy Rate at Record High

A brief excerpt:

From Moody’s Analytics Economists: Q1 Moody’s CRE Preliminary Trend Analysis

The national multifamily market has been under supply-side pressure over the past two years. Steady demand finally paused the vacancy climb after a banner year with record-level inventory growth. Average vacancy stalled at 6.3%, the highest since 2010.

Moody’s Analytics reported that the apartment vacancy rate was at 6.3% in Q1 2025, unchanged from an upwardly revised 6.3% in Q4, and up from 5.8% in Q1 2024. This is the highest vacancy rate since 2010.

This graph shows the apartment vacancy rate starting in 1980. (Annual rate before 1999, quarterly starting in 1999). Note: Moody’s Analytics is just for large cities.

There is much more in the article.

by Calculated Risk on 4/02/2025 08:15:00 AM

From ADP: ADP National Employment Report: Private Sector Employment Increased by 155,000 Jobs in March; Annual Pay was Up 4.6%

“Despite policy uncertainty and downbeat consumers, the bottom line is this: The March topline number was a good one for the economy and employers of all sizes, if not necessarily all sectors,” said Nela Richardson, chief economist, ADP.
emphasis added

This was above the consensus forecast of 119,000. The BLS report will be released Friday, and the consensus is for 135,000 non-farm payroll jobs added in March.

by Calculated Risk on 4/02/2025 07:00:00 AM

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

Mortgage applications decreased 1.6 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 28, 2025.

The Market Composite Index, a measure of mortgage loan application volume, decreased 1.6 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 1 percent compared with the previous week. The Refinance Index decreased 6 percent from the previous week and was 57 percent higher than the same week one year ago. The seasonally adjusted Purchase Index increased 2 percent from one week earlier. The unadjusted Purchase Index increased 2 percent compared with the previous week and was 9 percent higher than the same week one year ago.

“Treasury yields continue to be volatile as economic uncertainty dominates markets. Most mortgage rates finished last week lower, with the 30-year fixed essentially unchanged at 6.70 percent. Last week’s level of purchase applications was its highest since the end of January, driven by a 3 percent increase in conventional purchases, while government purchase applications were down 2 percent,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Overall purchase activity has shown year-over-year growth for more than two months as the inventory of existing homes for sale continues to increase, a positive development for the housing market despite the uncertain near-term outlook. Refinance applications were down almost 6 percent last week and remain very sensitive to rate movements, as most borrowers have mortgages with lower rates.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($806,500 or less) decreased to 6.70 percent from 6.71 percent, with points increasing to 0.62 from 0.60 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added

Click on graph for larger image.

The first graph shows the MBA mortgage purchase index.

According to the MBA, purchase activity is up 9% year-over-year unadjusted. 

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

Purchase application activity is up about 26% from the lows in late October 2023 and is 5% above the lowest levels during the housing bust.  

The second graph shows the refinance index since 1990.

The refinance index declined and remains very low.

by Calculated Risk on 4/01/2025 08:57:00 PM

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

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

• At 8:15 AM, The ADP Employment Report for March. This report is for private payrolls only (no government). The consensus is for 119,000 payroll jobs added in March, up from 77,000 added in February.

by Calculated Risk on 4/01/2025 06:32:00 PM

Wards Auto released their estimate of light vehicle sales for March: March U.S. Light-Vehicle Sales Surge in Preemptive Move to Potential Tariff-Based Price Increases (pay site).

March sales were proof that U.S. consumers are very much paying attention to tariffs, as demand on a seasonally adjusted annualized basis surged to 17.8 million units, highest for any month in nearly four years, and far above January-February’s combined total of 15.8 million. Buyers flocking to dealer lots to beat potential price increases, combined with some pre-tariff push by automakers raising deliveries to fleet customers lifted raw volume to over a 4-year high, not to mention a rare double-digit year-over-year gain. Regardless of any coming impacts from tariffs, March's booming results will cause lower volume in the second quarter due to the additional drain to dealer inventory that, based on industry norms, was already lean prior to the month.

Click on graph for larger image.

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

Sales in March (17.77 million SAAR) were up 11.1% from February, and up 13.3% from March 2024.

Sales in March were well above the consensus forecast.

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

This was the best March since 2021.

by Calculated Risk on 4/01/2025 01:50:00 PM

After the election in November 2016, I pointed out that the economy was solid, that there were significant economic tailwinds and that it was unlikely that Mr. Trump would do everything he said during the campaign. See: The Future is still Bright! and The Cupboard is Full. 

I was pretty optimistic on the economic outlook!

By early 2019, I was becoming more concerned: "So far Mr. Trump has had a limited negative impact on the economy. ... Fortunately the cupboard was full when Trump took office, and luckily there hasn't been a significant crisis" (emphasis added).  

Unfortunately, the COVID crisis struck in early 2020 and Trump performed poorly.

Once again, the economy was in good shape at the start of Mr. Trump's 2nd term in 2025.  Just after the election, Fed Chair Powell said, "The recent performance of our economy has been remarkably good, by far the best of any major economy in the world."  And in December, Powell said the US economy is the "envy of other large economies around the world".

In his 2nd term, Mr. Trump is being more aggressive with his economic plans.  At the same time, he is not benefiting from the tailwinds I described in 2016.

For example, in 2016, I was positive on housing starts and new home sales.  

Click on graph for larger image.

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

The black arrows point to the start of Mr. Trump's terms in 2017 and 2025.  In early 2017 I was projecting further increases in housing starts.  Now I think housing starts will be down year-over-year and move more sideways over the next few years.

Also, in 2016, demographics were improving, and the largest cohort in US history was moving into their peak earning years.  Now, demographics are more neutral, and possibly even negative if legal immigration is limited.

The key tailwinds at the start of Mr. Trump's 1st term and now more neutral and even negative.

And there are additional self-induced headwinds.  The tariffs are clearly negative for economic growth.  Goldman Sachs economists recently noted:

Reflecting both the tariff news and a decline in our Q1 GDP tracking estimate to just 0.2%, we have also lowered our 2025 GDP growth forecast by 0.5pp to 1.0% on a Q4/Q4 basis (and by 0.4pp to 1.5% on an annual average basis).

And - because of the rhetoric of the Trump administration (suggesting Canada should be the 51st state and the VP saying Denmark isn't a good ally (completely false and offensive) - there will be less international tourism to the US, and there is a growing international boycott of US goods.

Of course, I don't expect any progress over the next four years on key long-term economic issues like climate change and income / wealth inequality (that will likely get worse).

The US economy is resistant to policy mistakes, and I'm still not currently on recession watch.  However, I'm not sanguine.

by Calculated Risk on 4/01/2025 10:31:00 AM

From the Census Bureau reported that overall construction spending decreased:

Construction spending during February 2025 was estimated at a seasonally adjusted annual rate of $2,195.8 billion, 0.7 percent above the revised January estimate of $2,179.9 billion. The February figure is 2.9 percent above the February 2024 estimate of $2,133.8 billion.
emphasis added

Both private and public spending increased:

Spending on private construction was at a seasonally adjusted annual rate of $1,686.4 billion, 0.9 percent above the revised January estimate of $1,671.8 billion. ...

In February, the estimated seasonally adjusted annual rate of public construction spending was $509.3 billion, 0.2 percent above the revised January estimate of $508.1 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.

Private residential (red) spending is 5.3% below the peak in 2022.

Private non-residential (blue) spending is at a new peak.

Public construction spending (orange) is at a new peak.

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

On a year-over-year basis, private residential construction spending is up 1.6%. Private non-residential spending is up 2.5% year-over-year. Public spending is up 6.0% year-over-year.

This was above consensus expectations; however, spending for the previous two months was revised down.