Case-Shiller Prices, Consumer Confidence Up

Housing prices continue to climb, but not as fast in the hardest hit areas.  This is probably because mortgage rates have risen some 1 percent.  But they are no longer rising, as the bond market seems to have already digested the possibility of QE3 ending.

Home price appreciation is very strong but has slowed from early in the year. Case-Shiller's 20-city adjusted index is up 0.9 percent in the June report vs an average monthly gain of 1.4 percent from January to May. But the year-on-year adjusted gain, at a very sizable 12.0 percent, is just off its best level of the recovery which is May at plus 12.2 percent.

Graph:Econoday 

Monthly declines have been popping up in the data for the first time this year but are still isolated and mostly marginal. The West had the highest gains, around the 20 percent area led by Las Vegas at 24.8 percent and San Francisco at 24.4 percent. Note that West coast cities posted some of the sharpest declines during the 2008 meltdown. Cities showing the least gains this year are New York, at a year-on-year plus 3.2 percent, and Cleveland at 3.4 percent.

“Overall, the report shows that housing prices are rising but the pace may be slowing. Thirteen out of twenty cities saw their returns weaken from May to June. As we are in the middle of a seasonal buying period, we should expect to see the most gains. With interest rates rising to almost 4.6 percent, home buyers may be discouraged and sharp increases may be dampened," said David M. Blitzer, Index Committee Chair at S&P Dow Jones Indices.

            Meanwhile, the Conference Board’s consumer confidence index improved, but mainly in future wage growth, believe it or not.  The report's composite headline index showed a slight increase, to 81.5 this month from July's revised 81.0.

            But consumers’ expectation took a big jump in income, believe it or not.  The expectations component rose to 88.7 for a 2.7 point gain. And it was mostly their outlook on income which, after sliding at the beginning of the year in reaction to the hike in payroll taxes, is now at a 2-1/2 year high. The consumer's outlook on business conditions and the jobs market are also up.

Graph:Econoday

This is huge, needless to say, as consumers have been spending less because of the higher payroll tax rate until now.  In fact, if interest rates do hold at, say, 4.50 percent with zero origination points in California, at least, then housing prices should continue to climb this year with confidence rising.

Harlan Green © 2013