CalculatedRisk Newsletter

Architecture Billings Index in Contraction for 46 of Last 47 Months This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment including multi-family residential. From the AIA: Architecture firm billings continued to decline in August The AIA/Deltek Architecture Billings Index ® (ABI) score for the month was 47.2. While slightly fewer firms reported a decline in billings in August than in July, the majority of firms continued to see weak business conditions.

The Federal Reserve released the Financial Accounts of the United States - Z.1 (sometimes called the Flow of Funds report) for Q2 on Friday. We can use that data to calculated how much equity homeowners withdrew from their homes last quarter. Mortgage Equity Withdrawal is an aggregate number and is a combination of homeowners extracting equity - hence the name "MEW" - and normal principal payments and debt cancellation (modifications, short sales, and foreclosures).

The first question most people ask me is what will happen with house prices. However, for people working in the real estate business, like real estate agents, escrow officers, appraisers, and mortgage brokers, the first question is “When will the sales slump end?” The Existing Home sales market has been in a deep slump for almost four years. This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1994 as reported by the NAR.

This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment including multi-family residential. From the AIA: Architecture firm billings remain weak in July The AIA/Deltek Architecture Billings Index® (ABI) score for the month was 46.6, indicating somewhat further softening from June. The persistent downturn in business conditions now extends to nearly three and a half years, as many firms continue to struggle to grow their billings.

With house prices up low-single digits over the last year through mid-year, an interesting question is: How much will the Fannie & Freddie conforming loan limits (CLL) change for 2027? And how much will the FHA insured loan limits change? First, there are different loan limits for various geographical areas. There are also different loan limits depending on the number of units (from 1 to 4 units). For example, currently the CLL is $832,750 for one-unit properties in most areas.

Every month I review rents and vacancy rates. Please let me repeat some recent history … Back in 2020 and 2021, we saw a surge in household formation, mostly related to roommates splitting up (spending too much time together!). This led to a surge in rents (heavy demand), and rising rents led to a pickup in rental housing starts.

Another monthly update on rents. Tracking rents is important for understanding the dynamics of the housing market. Slower household formation and increased supply (more multi-family completions) has kept asking rents under pressure for the last few years. More recently, immigration policy is a negative for rentals.

Freddie Mac reported that the Single-Family serious delinquency rate in December was 0.59%, up from 0.58% November. Freddie's rate is unchanged year-over-year from 0.59% in December 2024. The December delinquency rate is still below the pre-pandemic level of 0.60%. Freddie's serious delinquency rate peaked in February 2010 at 4.20% following the housing bubble and peaked at 3.17% in August 2020 during the pandemic.

Freddie Mac reported that the Single-Family serious delinquency rate in November was 0.58%, up from 0.56% October. Freddie's rate is up year-over-year from 0.56% in November 2024, however, this is below the pre-pandemic level of 0.60%. Freddie's serious delinquency rate peaked in February 2010 at 4.20% following the housing bubble and peaked at 3.17% in August 2020 during the pandemic.

In June 2023, I wrote: Could 6% to 7% 30-Year Mortgage Rates be the "New Normal"? At that time, the Fed Funds rate was set at 5 to 5-1/4 percent and the Ten Year Treasury was yielding 3-3/4%. I noted in 2023: “the 10-year yield would likely increase even as the Fed lowers the Fed Funds rate.” And that is what happened. The 10-year is yielding 4-1/4% this morning. This is a key point. Just because the FOMC is cutting rates, doesn’t necessarily mean long rates will follow.