S &P/Case-Shiller Home Price Index
Home prices in major metropolitan areas continued to rise In December though the gains came in slightly behind expectations. Home price appreciation rose 0.8 percent in December, as Case-Shiller’s 20 city index extends its run of strong monthly gains. But, the year on year rate slowed to plus 5.7 percent slightly below the 6.0% line where the FHFA index has been trending, and below the 5.9% increase economists estimated. While home prices continue to rise the pace is slowing down. Household wealth is increasingly dependent not on wage gains, but on home–price appreciation.
There is a noticeable slowing in the consumer confidence index, to 92.2 in February vs. January’s revised 97.8. Readings are lower but only slightly for jobs hard to get, the most closely watched detail of the report. Jobs hard to get rose 6 tenths to 24.2 percent, which is still a low reading and isn’t convincing enough to point to a rise in the unemployment rate. Income expectations are still positive but slightly less so as are expectations for business conditions. Expectations for the jobs market have been on the pessimistic side in this report. Buying plans are mostly lower especially for housing, which won’t give a boost to the now moderate housing outlook. Inflation expectations continue to tick lower down 1 tenth for the fourth straight decline to a 4.7 percent rate which is a very low reading. FOMC policy makers have been reluctant to downgrade inflation expectations, but this report shows that the low oil prices and low prices for imports are more and more evident to the consumer. Most consumer confidence readings have been holding up better than this report which may suggest that is an outlier.
Existing Home Sales
Existing home sales were up 0.4 percent in January to a 5.47 million annualized rate. Year on year sales growth is in the double digits at 11.0 percent. This is a sign of underlying household strength, the single family component rose 1.0 percent to 4.86 million for a year on year increase of 11.2 percent. Condos have been the stronger of the two components and show signs of slowing at 610,000 down 4.7 percent, but still have a year on year increase of 8.9 percent. The median home price fell 4.2 percent to $213,800 with the year on year rate at plus 8.2 percent. But the low supply which has been holding back sales is coming into the market, up 3.4 percent in the month to 1.82 million. Supply relative to sales moved slightly higher, to 4.0 months, which is still well below 4.5 months from January of last year. The housing market is showing an upward trend.
Purchase applications have been boosted by lower interest rates; they have been very strong this year, up 2.0 percent in the February 19th week, for a year on year gain of 27 percent. These gains point to underlying strength for home sales. Refinancing applications have also been very strong this year, though they dipped 8 percent in the latest week this could be due to a slight increase in interest rates. Total mortgage applications fell 4.3 percent for the week ending February 19th.