S&P CoreLogic Case-Shiller National Home Price Index (HPI)

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Terry Miura, ‘Lost in the Story’, Oil on Canvas on Panel.

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S&P/Case-Shiller 20-city home price index, January (GS +0.6%, consensus +0.6%, last +0.6%): 

We expect the S&P/Case-Shiller 20-city home price index to rise 0.6% in the January report in line with the December pace. The measure still appears to be influenced by seasonal adjustment challenges, and we place more weight on the year-over-year increase, which ticked down one-tenth to 6.3% in December.

Actual:

US S&P/Case Shiller House Price Data (Jan): – House Price Index M/M +0.8% versus +0.7% expected, previous +0.6% revised to +0.7% – House Price Index Y/Y +6.4% versus +6.1% expected, previous +6.3%

Year-Over-Year:
The S&P Corelogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 6.2% annual gain in January, down from 6.3% in the previous month. The 10-City Composite annual increase came in at 6.0%, no change from the previous month. The 20-City Composite posted a 6.4% year-over-year gain, up from 6.3% in the previous month. 
Seattle, Las Vegas, and San Francisco reported the highest year-over-year gains among the 20 cities. In January, Seattle led the way with a 12.9% year-over-year price increase, followed by Las Vegas with an 11.1% increase and San Francisco with a 10.2% increase. Twelve of the 20 cities reported greater price increases in the year ending January 2018 versus the year ending December 2017.
The charts below compare the year-over-year returns of different housing price ranges (tiers) for the top two cities, Seattle and Las Vegas.
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Month-Over-Month: 
Before seasonal adjustment, the National Index posted a month-over-month gain of +0.05% in January. The 10-City and 20-City Composites both reported increases of +0.3%. After seasonal adjustment, the National Index recorded a +0.5% month-over-month increase in January. The 10-City and 20-City Composites posted +0.7% and +0.08% month-over-month increases, respectively. Sixteen of the 20 cities reported increases in January before seasonal adjustment, while all 20 cities reported increases after seasonal adjustment.
Analysis:
“The home price surge continues,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. ” Since the market bottom in December 2012, the S&P Corelogoc Case-Shiller National Home Price Index has climbed at a 4.7% real- inflation adjusted- annual rate.
That is twice the rate of economic growth as measured by the GDP. While price gains vary from city to city, there are few, if any, really weak spots. Seattle, up +12.9%  in the last year, continues to see the largest gains, followed by Las Vegas up +11.1% over the same period. Even Chicago and Washington, the cities with the smallest price gains, saw a +2.4% annual increase in home prices.
” Two factors supporting price increases are the low inventory of homes for sale and the low vacancy rate among owner-occupied housing. The current months -supply — how mny months at the current sales rate would be needed to absorb home currently for sale — is 3.4 ; the average since 2000 is 6.0 months, and the high in July 2010 was 11.9. Currently, the homeowner vacancy rate is 1.6%  compared to an average of 2.1% since 2000; it peaked in 2010 at 2.7%. Depsite limited supplies, rising prices, and higher mortgage rates, affordabiltiy is not a concern.* Affordabiltiy measures published by the National Assocation of Realtors show that a family with a median income could comfortably afford a mortage for a median priced home.”
*If only those willing to buy a home and bank’s willingness to lend mortgage credit to them were aligned.
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And I would argue that affordability is still a large concern. For more on this, check out Mr. Sanders most recent post on Confounded Interest entitled,

‘Simply Unaffordable! National House Price Index Increased 6.2% YoY In January (Too Bad Earnings Growth Is Only 2.6% YoY)’. 

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Lookback:

The spike in long-term interest rates and the stock market sell-off that followed closely afterward provided an early test of the conviction of forecasts for a stronger spring home buying season. Bond yields rose faster than expected at the start of the year, as expectations for economic growth ramped up on stronger reports of manufacturing activity, employment, and wage growth. Estimates for GDP growth have been ratcheted up, largely on hopes that capital spending will grow more rapidly than in past years.

As stated above, the expected consensus for January home sales and new home construction is to be healthy, however, constrained by supply concerns ( too few homes for sale, lots to build on, workers to build homes) and affordability challenges ( home prices have risen much faster than incomes).

The confidence level of consumers that have the belief now is a good time to buy a home has continued to trend lower in recent month largely due to the continued rise in home prices and lack of homes available for sale.

Last Friday, March 23rd, 2018, the Commerce Department reported New Home Sales had fallen -0.6% in February (third consecutive month they have been reported lower) at an annualized rate of 618,000 units. 

Taking into consideration that New Home Sales in January were revised upward from 593,000 to 622,000 units. If we take January’s unrevised level of 593,000 and use it as our base, moreover, factor in the expectations that New Home Sales would rise +4.4% 623,000 units. 

Additionally, for the preceding 12-months, New Home Sales rose +2.2% and the median price was reported to have risen +10.0% to $ 326,800! The reported inventory of homes was 306,000. At the current sales price, the inventory would be taken-up in 5.9 months, compared to 5.8 months in January.

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Source:

S&P CoreLogic Case-Shiller Home Price Indices

Hedgeye

Mr. Sanders of, Confounded Interest

-R.W.N II

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