Market Activity for June 26, 2012

Sector Activity for June 26 2012

CaseShiller HPI

The S&P CaseShiller Home Price Index has halted its latest streak of weakness as even the unadjusted reading (not seasonally adjusted, and the one to watch as seasonal figures have been distorted for a number of reasons) posted an increase for April (which is actually a three-month average). 

That unadjusted reading rose 1.28%, halting a seven-month streak of decline.  On a year-over-year basis, the price decline has improved to -1.90% from the -2.59% as of March.  There was only one city that posted a decline for the three-month period ended April and that was Detroit, down 3.62% (and off by 25.65% at an annual rate).  San Francisco posted the best increase, up 3.39% (where prices are still down 39.8% from the peak).  This was followed by Washington DC’s 2.77% gain (down 27.1% from the peak as of May) and Phoenix’s 2.47% gain (the second-worst from the peak, still down 51.3%). 

As the chart above illustrates, the latest bounce wasn’t enough to surpass the prior post-bubble low.  As you can also see, this most recent low was the third post-bubble nadir.  Undoubtedly, CaseShiller will post another increase for May and possibly for June too – the clues come from the increase within the existing-home data, information for which we already have for the month of May.  This latest bump in prices has the usual suspects restating that housing has found its bottom.

However, anyone who keeps decent tabs on the number of distressed properties that must still come to market (a number that ranges from 2-6 million units, the range depends on the percentage of these loans that are able to be cured – and it will take principal forgiveness to cure these terribly delinquent loans) along with yet another slump in economic activity (and thus job growth) will expect us to hit a fourth post-bubble low sometime over the next 6-12 months.  The timeline of this next decline can change as policymakers are continually attempting to thwart the inevitable.  But the inevitable cannot be escaped, only delayed.  We can then hope, for the umpteenth time, that this next low will prove to be the ultimate bottom in prices.  And at some point we will hit bottom and home prices will begin to organically rise again.  Such an occasion will be dependent upon policymakers allowing the market to work, and then followed by a lengthy period of strong economic growth. 

Consumer Confidence

The Conference Board’s gauge of consumer confidence, the longest-running measure on the subject, fell 1.4 points to a reading of 62.0 for June (missing the expected 63.0). 

It was the expectations part of the survey that pressured the headline number – respondent’s views of their finances a six months out.  That measure slide five points to 72.3; although, that reading had gotten way carried away as it came within four points of hitting the 45-year average as of May, so we’re just seeing a return to reality with that one. 

The present conditions measure actually rose a touch to 46.6 from the 44.9 hit in May – still 50 points below average (no that’s not a typo).

Richmond Fed

The Richmond Fed came in at -3 for June (expected at +2) after the +4 print for May.  (Why did economists expect a positive number, haven’t they seen enough evidence of the factory slump after Empire tanked, Philly came in at deep contraction mode and the latest industrial production number posted a decline?) 

New orders got slammed by 13 points to -12; order backlogs improved two points to -16; the number of employees actually remained positive, but was cut in half to a reading of 8; the average workweek took a 13-point beating to -2.

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Have a great day!

Brent Vondera, Senior Analyst