by Calculated Risk on 3/29/2016 02:51:00 PM

Here is the earlier post on Case-Shiller: Case-Shiller: National House Price Index increased 5.4% year-over-year in January

The year-over-year increase in prices is mostly moving sideways now around 5%. In January, the index was up 5.4% YoY.

In the earlier post, I graphed nominal house prices, but it is also important to look at prices in real terms (inflation adjusted).  Case-Shiller, CoreLogic and others report nominal house prices.  As an example, if a house price was $200,000 in January 2000, the price would be close to $274,000 today adjusted for inflation (37%).  That is why the second graph below is important - this shows "real" prices (adjusted for inflation).

It has been almost ten years since the bubble peak.  In the Case-Shiller release this morning, the National Index was reported as being 3.3% below the bubble peak.   However, in real terms, the National index is still about 17% below the bubble peak.

Nominal House Prices


The first graph shows the monthly Case-Shiller National Index SA, the monthly Case-Shiller Composite 20 SA, and the CoreLogic House Price Indexes (through December) in nominal terms as reported.

In nominal terms, the Case-Shiller National index (SA) is back to October 2005 levels, and the Case-Shiller Composite 20 Index (SA) is back to April 2005 levels, and the CoreLogic index (NSA) is back to June 2005.

Real House Prices

The second graph shows the same three indexes in real terms (adjusted for inflation using CPI less Shelter). Note: some people use other inflation measures to adjust for real prices.

In real terms, the National index is back to January 2004 levels, the Composite 20 index is back to September 2003, and the CoreLogic index back to January 2004.

In real terms, house prices are back to late 2003 levels.

Price-to-Rent

In October 2004, Fed economist John Krainer and researcher Chishen Wei wrote a Fed letter on price to rent ratios: House Prices and Fundamental Value. Kainer and Wei presented a price-to-rent ratio using the OFHEO house price index and the Owners' Equivalent Rent (OER) from the BLS.

Here is a similar graph using the Case-Shiller National, Composite 20 and CoreLogic House Price Indexes.

This graph shows the price to rent ratio (January 1998 = 1.0).

On a price-to-rent basis, the Case-Shiller National index is back to August 2003 levels, the Composite 20 index is back to May 2003 levels, and the CoreLogic index is back to August 2003.

In real terms, and as a price-to-rent ratio, prices are back to late 2003 levels - and the price-to-rent ratio maybe moving a little more sideways now.

by Calculated Risk on 3/29/2016 12:25:00 PM

From Fed Chair Janet Yellen: The Outlook, Uncertainty, and Monetary Policy. Excerpts on risks:

Although the baseline outlook has changed little on balance since December, global developments pose ongoing risks. These risks appear to have contributed to the financial market volatility witnessed both last summer and in recent months.

One concern pertains to the pace of global growth, which is importantly influenced by developments in China. There is a consensus that China's economy will slow in the coming years as it transitions away from investment toward consumption and from exports toward domestic sources of growth. There is much uncertainty, however, about how smoothly this transition will proceed and about the policy framework in place to manage any financial disruptions that might accompany it. These uncertainties were heightened by market confusion earlier this year over China's exchange rate policy.

A second concern relates to the prospects for commodity prices, particularly oil. For the United States, low oil prices, on net, likely will boost spending and economic activity over the next few years because we are still a major oil importer. But the apparent negative reaction of financial markets to recent declines in oil prices may in part reflect market concern that the price of oil was nearing a financial tipping point for some countries and energy firms. In the case of countries reliant on oil exports, the result might be a sharp cutback in government spending; for energy-related firms, it could entail significant financial strains and increased layoffs. In the event oil prices were to fall again, either development could have adverse spillover effects to the rest of the global economy.

If such downside risks to the outlook were to materialize, they would likely slow U.S. economic activity, at least to some extent, both directly and through financial market channels as investors respond by demanding higher returns to hold risky assets, causing financial conditions to tighten. But at the same time, we should not ignore the welcome possibility that economic conditions could turn out to be more favorable than we now expect. The improvement in the labor market in 2014 and 2015 was considerably faster than expected by either FOMC participants or private forecasters, and that experience could be repeated if, for example, the economic headwinds we face were to abate more quickly than anticipated. For these reasons, the FOMC must watch carefully for signs that the economy may be evolving in unexpected ways, good or bad.
emphasis added

by Calculated Risk on 3/29/2016 09:22:00 AM

S&P/Case-Shiller released the monthly Home Price Indices for January ("January" is a 3 month average of November, December and January prices).

This release includes prices for 20 individual cities, two composite indices (for 10 cities and 20 cities) and the monthly National index.

Note: Case-Shiller reports Not Seasonally Adjusted (NSA), I use the SA data for the graphs.

From S&P: Home Price Increases Continue in January According to the S&P/Case-Shiller Home Price Indices

The S&P/Case-Shiller U.S. National Home Price Index, covering all nine U.S. census divisions, recorded a slightly higher year-over-year gain with a 5.4% annual increase in January 2016. The 10-City Composite is up slightly at 5.1% for the year. The 20-City Composite’s year-over-year gain is 5.7%. After seasonal adjustment, the National, 10-City Composite, and 20-City Composite rose 0.5%, 0.8%, and 0.7%, respectively, from the prior month.
...
Before seasonal adjustment, the National Index, the 10-City Composite, and the 20-City Composite all remained unchanged in January. After seasonal adjustment, all three composites reported strong advances. Eleven of 20 cities reported increases in January before seasonal adjustment; after seasonal adjustment, all 20 cities increased for the month
emphasis added

Click on graph for larger image.

The first graph shows the nominal seasonally adjusted Composite 10, Composite 20 and National indices (the Composite 20 was started in January 2000).

The Composite 10 index is off 11.8% from the peak, and up 0.5% in January (SA).

The Composite 20 index is off 10.2% from the peak, and up 0.8% (SA) in January.

The National index is off 3.3% from the peak, and up 0.7% (SA) in January.  The National index is up 30.6% from the post-bubble low set in December 2011 (SA).

The second graph shows the Year over year change in all three indices.

The Composite 10 SA is up 5.1% compared to January 2015.

The Composite 20 SA is up 5.7% year-over-year..

The National index SA is up 5.4% year-over-year.

Prices increased (SA) in 20 of the 20 Case-Shiller cities in December seasonally adjusted.  (Prices increased in 11 of the 20 cities NSA)  Prices in Las Vegas are off 37.8% from the peak.

The last graph shows the bubble peak, the post bubble minimum, and current nominal prices relative to January 2000 prices for all the Case-Shiller cities in nominal terms.

As an example, at the peak, prices in Phoenix were 127% above the January 2000 level. Then prices in Phoenix fell slightly below the January 2000 level, and are now up 57% above January 2000 (57% nominal gain in almost 16 years).

These are nominal prices, and real prices (adjusted for inflation) are up about 40% since January 2000 - so the increase in Phoenix from January 2000 until now is about 17% above the change in overall prices due to inflation.

Seven cities - Charlotte, Boston, Dallas, Denver, Portland, San Francisco and Seattle.    Detroit prices are only 5% above the January 2000 level.

I'll have more on house prices later.

by Calculated Risk on 3/28/2016 09:21:00 PM

Tuesday:
• At 9:00 AM ET, S&P/Case-Shiller House Price Index for January. Although this is the January report, it is really a 3 month average of November, December and January prices. The consensus is for a 5.8% year-over-year increase in the Comp 20 index for January. The Zillow forecast is for the National Index to increase 5.6% year-over-year in January.

• At 12:20 PM, Speech by Fed Chair Janet Yellen, Economic Outlook and Monetary Policy, At the Economic Club of New York Luncheon, New York, New York

by Calculated Risk on 3/28/2016 04:39:00 PM

From the ATA: ATA Truck Tonnage Index Jumps 7.2% in February

American Trucking Associations’ advanced seasonally adjusted For-Hire Truck Tonnage Index jumped 7.2% in February, following a revised 0.3% reduction during January. In February, the index equaled 144 (2000=100), up from 134.3 in January. February’s level is an all-time high.

Compared with February 2015, the SA index was up 8.6%, which was up from January’s 1.1% year-over-year gain.
...
“While it is nice to see a strong February, I caution everyone not read too much into it,” said ATA Chief Economist Bob Costello. “The strength was mainly due to a weaker than average January, including bad winter storms, thus there was some catch-up going on in February. Normally, fleets report large declines to ATA in February tonnage, in the range of 5.4% to 6.7% over the last three years. So, the small increase this year yielded a big seasonally adjusted gain. If March is strong, then I’ll get more excited.

“I’m still concerned about the elevated inventories throughout the supply chain. Last week, the Census Bureau reported that relative to sales, inventories rose again in January, which is troubling.” he said. “We need those inventories reduced before trucking can count on more consistent, better freight volumes.”
emphasis added

Click on graph for larger image.

Here is a long term graph that shows ATA's For-Hire Truck Tonnage index.

The dashed line is the current level of the index.

The index is now up 8.6% year-over-year.

by Calculated Risk on 3/28/2016 01:38:00 PM

Note: I follow several house price indexes (Case-Shiller, CoreLogic, Black Knight, Zillow, FHFA, FNC and more). Note: Black Knight uses the current month closings only (not a three month average like Case-Shiller or a weighted average like CoreLogic), excludes short sales and REOs, and is not seasonally adjusted.

From Black Knight: Black Knight Home Price Index Report: January Transactions; U.S. Home Prices Up 0.1 Percent for the Month; Up 5.3 Percent Year-Over-Year

• U.S. home prices were basically flat for the month, rising just 0.1% from December, and up 5.3% on a year-over- year basis

• This puts national home prices up 26.7% since the bottom of the market at the start of 2012

• At $253K, the national level HPI is now just 5.4% off its June 2006 peak of $267K (this last has been revised slightly - from $268K - due to additional historical data)

• New York again led gains among the states with 0.9 percent month-over-month appreciation, while Illinois saw the most negative movement at -0.4 percent

• Of the nation’s 40 largest metros, 9 hit new peaks:
◦Austin, TX ($287K)
◦Dallas, TX ($220K)
◦Denver, CO ($327K)
◦Houston, TX ($220K)
◦Kansas City, MO ($173K)
◦Nashville, TN ($222K)
◦Portland, OR ($326K)
◦San Francisco, CA ($728K)
◦San Jose, CA ($867K)

The year-over-year increase in the index has been about the same for the last year.

by Calculated Risk on 3/28/2016 10:36:00 AM

From the Dallas Fed: Texas Manufacturing Activity Rebounds in March

Texas factory activity expanded slightly in March, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rebounded to positive territory this month—coming in at 3.3—after two months of negative readings.
...
Perceptions of broader business conditions remained negative but showed signs of slight stabilization in March. The general business activity index jumped 18 points but remained negative for a 15th month, posting a reading of -13.6. The company outlook index posted a fourth negative reading in a row but edged up to -11.0.

Labor market indicators reflected continued decline in March. The employment index was largely unchanged at -10.3, with 12 percent of firms noting net hiring and 22 percent noting net layoffs. The hours worked index remained negative for a third month in a row but edged up to -5.6.
emphasis added

This was the last of the regional Fed surveys for March.

Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

Click on graph for larger image.

The New York and Philly Fed surveys are averaged together (yellow, through March), and five Fed surveys are averaged (blue, through March) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through February (right axis).

It seems likely the ISM manufacturing index will show expansion in March following five months of contraction.  The consensus is the ISM index will increase to 50.5% from 49.5% in February (above 50 is expansion).

by Calculated Risk on 3/28/2016 10:03:00 AM

From the NAR: Pending Home Sales Move Forward in February

The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 3.5 percent to 109.1 in February from a downwardly revised 105.4 in January and is now 0.7 percent above February 2015 (108.3). Although the index has now increased year-over-year for 18 consecutive months, last month's annual gain was the smallest.
...
The PHSI in the Northeast declined 0.2 percent to 94.0 in February, but is still 12.6 percent above a year ago. In the Midwest the index shot up 11.4 percent to 112.6 in February, and is now 2.5 percent above February 2015.

Pending home sales in the South increased 2.1 percent to an index of 122.4 in February but are 0.4 percent lower than last February. The index in the West climbed 0.7 percent in February to 96.4, but is now 6.2 percent below a year ago.
emphasis added

This was above expectations of a 1.5% increase for this index.  Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in March and April.

by Calculated Risk on 3/28/2016 08:40:00 AM

The BEA released the Personal Income and Outlays report for February:

Personal income increased $23.7 billion, or 0.2 percent ... according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $11.0 billion, or 0.1 percent.
...
Real PCE -- PCE adjusted to remove price changes -- increased 0.2 percent in February, in contrast to a decrease of less than 0.1 percent in January. ... The price index for PCE decreased 0.1 percent in February, in contrast to an increase of 0.1 percent in January. The PCE price index, excluding food and energy, increased 0.1 percent, compared with an increase of 0.3 percent.

The February PCE price index increased 1.0 percent from February a year ago. The February PCE price index, excluding food and energy, increased 1.7 percent from February a year ago.

The following graph shows real Personal Consumption Expenditures (PCE) through February 2016 (2009 dollars). Note that the y-axis doesn't start at zero to better show the change.

Click on graph for larger image.

The dashed red lines are the quarterly levels for real PCE.

The increase in personal income was larger than expected.  And the increase in PCE was at the 0.1% increase consensus.

On inflation: The PCE price index increased 1.0 percent year-over-year due to the sharp decline in oil prices. The core PCE price index (excluding food and energy) increased 1.7 percent year-over-year in February.

Using the two-month method to estimate Q1 PCE growth, PCE was increasing at a 1.8% annual rate in Q1 2016 (using the mid-month method, PCE was increasing 1.6%). This suggests sluggish PCE growth in Q1.

by Calculated Risk on 3/27/2016 08:02:00 PM

This immigration program has really boosted sales in certain California and New York areas, from the WSJ: U.S. Immigration Program for Foreign Investors Sees Demand Surge

The program, known as EB-5, received applications from 17,691 investors in 2015, up from 11,744 in 2014 and 6,554 in 2013, according to figures released last week by U.S. Citizenship and Immigration Services.
...
The EB-5 program offers green cards to aspiring immigrants who invest at least $500,000 into certain businesses that have been determined to create at least 10 jobs per investor.

First created in 1990, EB-5 was barely used until the aftermath of the 2008 recession, when real-estate developers realized it offered a cheap and accessible form of financing when banks were reluctant to lend. The program has since become mainstream within the real-estate development world, particularly among high-end developers in New York, who recruit heavily in China.

Weekend:
• Schedule for Week of March 27, 2016

Monday:
• At 8:30 AM ET, Personal Income and Outlays for February. The consensus is for a 0.1% increase in personal income, and for a 0.1% increase in personal spending. And for the Core PCE price index to increase 0.2%.

• At 10:00 AM, Pending Home Sales Index for February. The consensus is for a 1.5% increase in the index.

• At 10:30 AM, Dallas Fed Manufacturing Survey for March. This is the last of the regional Fed manufacturing surveys for March.

From CNBC: Pre-Market Data and Bloomberg futures: currently S&P futures are up 4 and DOW futures are up 44 (fair value).

Oil prices were mixed over the last week with WTI futures at $39.75 per barrel and Brent at $40.64 per barrel.  A year ago, WTI was at $46, and Brent was at $54 - so prices are down about 15% to 22% year-over-year, respectively.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.04 per gallon (down almost $0.40 per gallon from a year ago).