Today, in the Calculated Risk Real Estate Newsletter: The "Home ATM" Mostly Closed in Q3

A brief excerpt:

During the housing bubble, many homeowners borrowed heavily against their perceived home equity - jokingly calling it the “Home ATM” - and this contributed to the subsequent housing bust, since so many homeowners had negative equity in their homes when house prices declined.
...
Here is the quarterly increase in mortgage debt from the Federal Reserve’s Financial Accounts of the United States - Z.1 (sometimes called the Flow of Funds report) released today. In the mid ‘00s, there was a large increase in mortgage debt associated with the housing bubble.

In Q3 2025, mortgage debt increased $108 billion, unchanged from $108 billion in Q2. Note the almost 7 years of declining mortgage debt as distressed sales (foreclosures and short sales) wiped out a significant amount of debt.

However, some of this debt is being used to increase the housing stock (purchase new homes), so this isn’t all Mortgage Equity Withdrawal (MEW).

The Federal Reserve released the Q3 2025 Flow of Funds report today: Financial Accounts of the United States.

The net worth of households and nonprofits rose to $181.6 trillion during the third quarter of 2025. The value of directly and indirectly held corporate equities increased $5.5 trillion and the value of real estate decreased $0.3 trillion.
...
Household debt increased 4.1 percent at an annual rate in the third quarter of 2025. Consumer credit grew at an annual rate of 2.3 percent, while mortgage debt (excluding charge-offs) grew at an annual rate of 3.2 percent.

Click on graph for larger image.

The first graph shows Households and Nonprofit net worth as a percent of GDP.  
Net worth increased $6.1 trillion in Q3.  As a percent of GDP, net worth increased in Q3 but is still below the peak in 2021.
This includes real estate and financial assets (stocks, bonds, pension reserves, deposits, etc.) net of liabilities (mostly mortgages). Note that this does NOT include public debt obligations.

The second graph shows homeowner percent equity since 1952.

Household percent equity (as measured by the Fed) collapsed when house prices fell sharply in 2007 and 2008.

In Q3 2025, household percent equity (of household real estate) was at 71.6% - down from 72.0% in Q2, 2025

Note: This includes households with no mortgage debt.

The third graph shows household real estate assets and mortgage debt as a percent of GDP.  

Mortgage debt increased by $108 billion in Q3.

Mortgage debt is up $2.99 trillion from the peak during the housing bubble, but, as a percent of GDP is at 43.9% - down from Q2 - and down from a peak of 73.1% of GDP during the housing bust.

The value of real estate, as a percent of GDP, decreased in Q3 and is below the recent peak in Q2 2022, but is well above the median of the last 30 years.

Today, in the Calculated Risk Real Estate Newsletter: Housing Starts Decreased to 1.246 million Annual Rate in October

A brief excerpt:

Note: The Census Bureau is still catching up. They released Start data for September and October today, but we are still missing November data.
...
The third graph shows the month-to-month comparison for total starts between 2024 (blue) and 2025 (red).

Total starts were down 7.8% in October compared to October 2024.

Year-to-date (YTD) starts are down 0.7% compared to the same period in 2024. Single family starts are down 7.0% YTD and multi-family up 18.0% YTD.

There is much more in the article.

From the Census Bureau: Permits, Starts and Completions

Housing Starts:
Privately-owned housing starts in October were at a seasonally adjusted annual rate of 1,246,000. This is 4.6 percent below the revised September estimate of 1,306,000 and is 7.8 percent below the October 2024 rate of 1,352,000. Single-family housing starts in October were at a rate of 874,000; this is 5.4 percent above the revised September figure of 829,000. The October rate for units in buildings with five units or more was 347,000.

Building Permits:
Privately-owned housing units authorized by building permits in October were at a seasonally adjusted annual rate of 1,412,000. This is 0.2 percent below the revised September rate of 1,415,000 and is 1.1 percent below the October 2024 rate of 1,428,000. Single-family authorizations in October were at a rate of 876,000; this is 0.5 percent below the revised September figure of 880,000. Authorizations of units in buildings with five units or more were at a rate of 481,000 in October.
emphasis added

Click on graph for larger image.

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

Multi-family starts (blue, 2+ units) decreased month-over-month in October.   Multi-family starts were down 7.9% year-over-year.

Single-family starts (red) increased in October and were down 7.8% year-over-year.

The second graph shows single and multi-family housing starts since 1968.

Total housing starts in October were well below expectations.   We are still missing data for November due to the government shutdown.

I'll have more later …

The headline jobs number in the December employment report was slightly below expectations, however October and November were revised down by 76,000. The unemployment rate decreased to 4.4%.
Earlier: December Employment Report: 50 thousand Jobs, 4.4% Unemployment Rate
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 years old participation rate was unchanged in December at 83.8%% from 83.8% in November.
The 25 to 54 employment population ratio increased to 80.7% from 80.6% the previous month.
Both are down slightly from the recent peaks, but still near the highest level this millennium.

Average Hourly Wages

The graph shows the nominal year-over-year change in "Average Hourly Earnings" for all private employees from the Current Employment Statistics (CES).  
There was a huge increase at the beginning of the pandemic as lower paid employees were let go, and then the pandemic related spike reversed a year later.

Wage growth has trended down after peaking at 5.9% YoY in March 2022 and was at 3.8% YoY in December, up from 3.6% YoY in November. 
Part Time for Economic Reasons

From the BLS report:

"The number of people employed part time for economic reasons, at 5.3 million, changed little in December but is up by 980,000 over the year. These individuals would have preferred full-time employment but 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 decreased in December to 5.34 million from 5.49 million in November.  This is well above the pre-pandemic levels and near the highest levels since mid-2021.

These workers are included in the alternate measure of labor underutilization (U-6) that decreased to 8.4% from 8.7% in November. This is down from the record high in April 2020 of 22.9% and up from the lowest level on record (seasonally adjusted) in December 2022 (6.6%). (This series started in 1994). This measure is well above the 7.0% 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 1.95 million workers who have been unemployed for more than 26 weeks and still want a job, up from 1.91 million in November.
This is down from post-pandemic high of 4.171 million, and up from the recent low of 1.056 million.

This is above pre-pandemic levels.

Summary:

The headline jobs number in the December employment report was slightly below expectations, however October and November were revised down by 76,000.  The unemployment rate decreased to 4.4%.
This was another weak employment report.  

From the BLS: Employment Situation

Both total nonfarm payroll employment (+50,000) and the unemployment rate (4.4 percent) changed little in December, the U.S. Bureau of Labor Statistics reported today. Employment continued to trend up in food services and drinking places, health care, and social assistance. Retail trade lost jobs.
...
The change in total nonfarm payroll employment for October was revised down by 68,000, from -105,000 to -173,000, and the change for November was revised down by 8,000, from +64,000 to +56,000. With these revisions, employment in October and November combined is 76,000 lower than previously reported.
emphasis added

Click on graph for larger image.

The first graph shows the jobs added per month since January 2021.

Total payrolls increased by 50 thousand in December.  Private payrolls increased by37 thousand, and public payrolls increased 13 thousand.

Payrolls for October and November were revised down by 76 thousand, combined.  The economy has only added 93 thousand jobs since April (8 months).
The second graph shows the year-over-year change in total non-farm employment since 1968.

In December, the year-over-year change was 0.594 million jobs.  
Year-over-year employment growth has slowed sharply.



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

The Labor Force Participation Rate decreased to 62.4% in December, from 62.5% in November. This is the percentage of the working age population in the labor force.

The Employment-Population ratio increased to 59.7% from 59.6% in November (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 decreased to 4.4% in December from 4.5% in November.  

This was slightly below consensus expectations, however, October and November payrolls were revised down by 76,000 combined.
Overall another weak report.
I'll have more later ...

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

Friday:
• At 8:30 AM ET,: Employment Report for December.   The consensus is for 55,000 jobs added, and for the unemployment rate to decline to 4.5%.

• At 10:00 AM: Housing Starts for September and October.

• At 10:00 AM: University of Michigan's Consumer sentiment index (Preliminary for January)

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

On Friday at 8:30 AM ET, the BLS will release the employment report for December. The consensus is for 55,000 jobs added, and for the unemployment rate to decrease to 4.5%. There were 64,000 jobs added in November, and the unemployment rate was at 4.6%.

From Goldman Sachs:

We forecast that payrolls rose 70k (vs. 55k consensus) in December and the unemployment rate fell to 4.5% (vs. 4.5% consensus). ... We expect the unemployment rate to edge down to 4.5% because the increase to 4.6% in November largely reflected the impact of furloughed federal government workers during the shutdown.
emphasis added

From BofA:

Dec NFP are likely to tick up to a stable 70k (private: 75k) print, higher than consensus expectations. Initial claims remain low and continuing claims have trended lower since Oct. Education & health jobs should remain the driver of payroll growth. Given the strength in air travel and holiday spending, we project a rise in leisure & hospitality jobs. After the u-rate jumping to 4.6% in Nov, in part due to shutdown-related distortions, we expect a decline to 4.5%. It is likely that the worst is behind us in the labor market.

• ADP Report: The ADP employment report showed 41,000 private sector jobs were added in December.  This was slightly below consensus forecasts.  However, in general, ADP hasn't been very useful in forecasting the BLS report.

• ISM Surveys: Note that the ISM indexes are diffusion indexes based on the number of firms hiring (not the number of hires).  The ISM® manufacturing employment index increased to 44.9%, up from 44.0% the previous month. This suggests manufacturing jobs lost in December. The ADP report indicated 5,000 manufacturing jobs lost in December.

The ISM® services employment index increased to 52.0%, up from 48.9%.  This suggests job gains in December.  

• Unemployment Claims: The weekly claims report showed about the same number of initial unemployment claims during the reference week at 224,000 in December compared to 222,000 in November.  This suggests about the same number of layoffs in December as in November.

• Conclusion: Over the last 6 months, employment gains averaged 17 thousand per month.  The ADP report, the ISM Surveys, and unemployment claims suggest similar gains in December compared to November.   I'll take the over for December - but still weak hiring.

From Manheim Consulting today: Manheim Used Vehicle Value Index: December 2025 Trends

The Manheim Used Vehicle Value Index (MUVVI) rose to 205.5, reflecting a 0.4% increase for wholesale used-vehicle prices (adjusted for mix, mileage, and seasonality) compared to December 2024. The December index is up 0.1% month over month.
emphasis added

Click on graph for larger image.

This index from Manheim Consulting is based on all completed sales transactions at Manheim’s U.S. auctions.

The Manheim index suggests used car prices increased in December (seasonally adjusted) and were up 0.4% YoY.

The Census Bureau and the Bureau of Economic Analysis reported:

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced today that the goods and services deficit was $29.4 billion in October, down $18.8 billion from $48.1 billion in September, revised.

October exports were $302.0 billion, $7.8 billion more than September exports. October imports were $331.4 billion, $11.0 billion less than September imports.
emphasis added

Click on graph for larger image.

Exports increased and imports decreased in October. 

Exports were up 12% year-over-year; imports were down 4% year-over-year.
Imports increased sharply earlier this year as importers rushed to beat tariffs.  

The second graph shows the U.S. trade deficit, with and without petroleum.

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.

Note that net, exports of petroleum products are positive and have been increasing.

The trade deficit with China decreased to $14.9 billion from $28.1 billion a year ago.

The DOL reported:

In the week ending January 3, the advance figure for seasonally adjusted initial claims was 208,000, an increase of 8,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 199,000 to 200,000. The 4-week moving average was 211,750, a decrease of 7,250 from the previous week's revised average. This is the lowest level for this average since April 27, 2024 when it was 210,250. The previous week's average was revised up by 250 from 218,750 to 219,000.
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 decreased to 211,750.

This was slightly above the consensus estimate.

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

Thursday:
• At 8:30 A ET, Trade Balance report for November from the Census Bureau. The consensus is the trade deficit to be $59.4 billion.  The U.S. trade deficit was at $52.8 billion in September.

• Also at 8:30 AM, The initial weekly unemployment claims report will be released.  The consensus is for 205K, up from 199K.

Today, in the Calculated Risk Real Estate Newsletter: 1st Look at Local Housing Markets in December

A brief excerpt:

Last year (2025) might have seen the lowest number of existing home sales since 1995. It will be close! Even if sales beat 2024 sales, these will be the two lowest sales years since 1995. Sales will be worse than any year during the housing bust.

Most readers probably don’t remember 1995, but I do! If I went to an open house ‘95, I was frequently the only person to visit all day. Just me and the crickets.

December sales will be mostly for contracts signed in October and November, and mortgage rates averaged 6.25% in October and 6.24% in November (lower than for closed sales in November). ...

In December, sales in these early reporting markets were up 2.5% YoY. Last month, in November, these same markets were down 10.8% year-over-year Not Seasonally Adjusted (NSA).

Important: There was one more working days in December 2025 (22) as in December 2024 (21). So, the year-over-year change in the headline SA data will be less than the change in NSA data (there are other seasonal factors).
...
This was just several early reporting markets. Many more local markets to come!

There is much more in the article.

(Posted with permission). The ISM® Services index was at 54.4%, up from 52.6% the previous month. The employment index increased to 52.0%, up from 48.9%. Note: Above 50 indicates expansion, below 50 in contraction.

From the Institute for Supply Management: Services PMI® at 54.4% December 2025 ISM® Services PMI® Report

Economic activity in the services sector continued to expand in December, say the nation’s purchasing and supply executives in the latest ISM® Services PMI® Report. The Services PMI® registered at 54.4 percent, finishing 2025 on a positive note with its 10th month in expansion territory — and its highest reading — of the year.

The report was issued today by Steve Miller, CPSM, CSCP, Chair of the Institute for Supply Management® (ISM®) Services Business Survey Committee:

“In December, the Services PMI® registered a reading of 54.4 percent, 1.8 percentage points higher than the November figure of 52.6 percent and a third consecutive month of expansion. The Business Activity Index continued in expansion territory in December, registering 56 percent, 1.5 percentage points higher than the reading of 54.5 percent recorded in November. The New Orders Index also remained in expansion in December, with a reading of 57.9 percent, 5 percentage points above November’s figure of 52.9 percent. The Employment Index expanded for the first time in seven months with a reading of 52 percent, a 3.1-percentage point improvement from the 48.9 percent recorded in November — the fifth consecutive monthly increase since a reading of 46.4 percent in July.

“The Supplier Deliveries Index registered 51.8 percent, 2.3 percentage points lower than the 54.1 percent recorded in November. This is the 13th consecutive month that the index has been in expansion territory, indicating slower supplier delivery performance. (Supplier Deliveries is the only ISM® PMI® Reports index that is inversed; a reading of above 50 percent indicates slower deliveries, which is typical as the economy improves and customer demand increases.)

“The Prices Index registered 64.3 percent in December, its lowest level since a reading of 60.9 percent in March 2025. The December figure was a 1.1-percentage point drop from November’s reading of 65.4 percent. The index has exceeded 60 percent for 13 straight months.br /> emphasis added

Employment expanded following six consecutive month of contraction.

From the BLS: Job Openings and Labor Turnover Summary

The number of job openings was little changed at 7.1 million in November, the U.S. Bureau of Labor Statistics reported today. Over the month, hires were little changed and total separations were unchanged at 5.1 million each. Within separations, both quits (3.2 million) and layoffs and discharges (1.7 million) were little changed.
emphasis added

The following graph shows job openings (black line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

This series started in December 2000.

Note: The difference between JOLTS hires and separations is similar to the CES (payroll survey) net jobs headline numbers. This report is for November; the employment report to be released on Friday will be for December.

Click on graph for larger image.

Note that hires (dark blue) and total separations (red and light blue columns stacked) are usually pretty close each month. This is a measure of labor market turnover.  When the blue line is above the two stacked columns, the economy is adding net jobs - when it is below the columns, the economy is losing jobs.

The spike in layoffs and discharges in March 2020 is labeled, but off the chart to better show the usual data.

Jobs openings decreased in November to 7.15 million from 7.45 million in October.
The number of job openings (black) were down 11% year-over-year. 

Quits were up 4% year-over-year. These are voluntary separations. (See light blue columns at bottom of graph for trend for "quits").

From ADP: ADP National Employment Report: Private Sector Employment Increased by 41,000 Jobs in December; Annual Pay was Up 4.4%

“Small establishments recovered from November job losses with positive end-of-year hiring, even as large employers pulled back,” said Dr. Nela Richardson, chief economist, ADP.
emphasis added

This was below the consensus forecast of 50,000 jobs added. The BLS will report on Friday, and the consensus is for 55,000 jobs added.

From the MBA: MMortgage Applications Decreased Over a Two-Week Period in Latest MBA Weekly Survey

Mortgage applications decreased 9.7 percent from two weeks earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending January 2, 2026. The results include an adjustment for the holidays.

The Market Composite Index, a measure of mortgage loan application volume, decreased 9.7 percent on a seasonally adjusted basis from two weeks earlier. On an unadjusted basis, the Index decreased 28 percent compared with two weeks ago. The holiday adjusted Refinance Index decreased 14 percent from two weeks ago and was 133 percent higher than the same week one year ago. The unadjusted Refinance Index decreased 31 percent from two weeks ago and was 108 percent higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 6 percent from two weeks earlier. The unadjusted Purchase Index decreased 23 percent compared with two weeks ago and was 10 percent higher than the same week one year ago.

“Mortgage rates started the New Year with a decline to 6.25 percent, the lowest level since September 2024. Refinance applications were up 7 percent for the week but were at a slower pace than in the weeks leading up to the holidays,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “FHA refinance applications saw a 19 percent increase, although that was a partial rebound from a drop the week before. MBA continues to expect mortgage rates to stay around current levels, with spells of refinance opportunities in the weeks when rates move lower.”

Added Kan, “Purchase applications were 10 percent higher than the same week a year ago but were down over the week following decreases in conventional and FHA applications. The average loan size was $408,700, the smallest in a year, driven by lower average loan sizes across both conventional and government loan types.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($806,500 or less) decreased to 6.25 percent from 6.32 percent, with points decreasing to 0.57 from 0.59 (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 10% year-over-year unadjusted. 
Red is a four-week average (blue is weekly).  
Purchase application activity is still depressed, but solidly above the lows of 2023 and above the lowest levels during the housing bust.  

The second graph shows the refinance index since 1990.

The refinance index increased from the bottom as mortgage rates declined, but is down from the recent peak in September as rates moved sideways.

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. This will be two weeks of data.

• At 8:15 AM, The ADP Employment Report for December. This report is for private payrolls only (no government). The consensus is for 50,000, up from -32,000 jobs added in November.

• At 10:00 AM, Job Openings and Labor Turnover Survey for November from the BLS.

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

The BEA reported that light vehicle sales were at 16.0 million in December on a seasonally adjusted annual basis (SAAR). This was up 1.9% from the sales rate in November, and down 4.9% from December 2024.

Click on graph for larger image.

This graph shows light vehicle sales since 2006 from the BEA (blue) through December.
Vehicle sales were over 17 million SAAR in March and April as consumers rushed to "beat the tariffs".
Then sales were depressed in May and June. 
Sales were boosted in August and September due to the termination of the EV credit at the end of September.

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

Sales in Decvember were slightly above the consensus forecast.
Light vehicle sales were up 2.4% in 2025 compared to 2024.

This graph shows heavy truck sales since 1967 using data from the BEA. The dashed line is the December 2025 seasonally adjusted annual sales rate (SAAR) of 311 thousand.

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

Click on graph for larger image.

Heavy truck sales were at 311 thousand SAAR in December, down from 336 thousand in November, and down 32.5% from 461 thousand SAAR in December 2024.
Sales were down 15.3% in 2025 compared to annual sales in 2024.
Usually, heavy truck sales decline sharply prior to a recession, and sales have collapsed recently.