Case-Shiller: Home Prices Continue Upward Trend

U.S. home prices continue to surge according to the latest S&P CoreLogic/Case-Shiller Indices, which found June prices on an upward trend (at 6.2 percent year-over-year), inciting affordability concerns. “Home prices continue to rise across the U.S.” said David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices. “However, even as home prices keep climbing, we are seeing signs that growth is easing in the housing market. Sales of both new and existing homes are roughly flat over the last six months amidst news stories of an increase in the number of homes for sale in some market. Rising mortgage rates—30-year fixed-rate mortgages rose from 4 percent to 4.5 percent since January—and the rise in home prices are affecting housing affordability.”

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index’s 10-City Composite, which is an average of 10 metros (Boston, Chicago, Denver, Las Vegas, Los Angeles, Miami, New York, San Diego, San Francisco and Washington, D.C.), rose 6 percent year-over-year in June, a decrease from 6.2 percent in May. The 20-City Composite—which is an average of the 10 metros in the 10-City Composite, plus Atlanta, Charlotte, Cleveland, Dallas, Detroit, Minneapolis, Phoenix, Portland, Seattle and Tampa—rose 6.3 percent year-over-year in June, down from 6.5 percent in May. Month-over-month, both the 10-City Composite and the 20-City Composite rose, 0.4 percent and 0.5 percent, respectively.

📷

“The west still leads the rise in home prices with Las Vegas displacing Seattle as the market with the fastest price increase. Population and employment growth often drive home prices. Las Vegas is among the fastest growing U.S. cities based on both employment and population, with its unemployment rate dropping below the national average in the last year,” said Blitzer. “The northeast and mid-west are seeing smaller home price increases. Washington, Chicago and New York City showed the three slowest annual price gains among the 20 cities covered.”

The complete data for the 20 markets measured by S&P:

Atlanta, Ga. Month-Over-Month (MoM): 0.7 % Year-Over-Year (YoY): 5.7%

Boston, Mass. MoM: 0.9% YoY: 7.1%

Charlotte, N.C. MoM: 0.6% YoY: 5.7%

Chicago, Ill. MoM: 0.8% YoY: 3.3%

Cleveland, Ohio MoM: 1% YoY: 5.1%

Dallas, Texas MoM: 0.4% YoY: 5.2%

Denver, Colo. MoM: 0.6% YoY: 8.3%

Detroit, Mich. MoM: 1% YoY: 6.4%

Las Vegas, Nev. MoM: 1.4% YoY: 13%

Los Angeles, Calif. MoM: 1.4% YoY: 7.4%

Miami, Fla. MoM: .7% YoY: 5.2%

Minneapolis, Minn. MoM: 1% YoY: 6.4%

New York, N.Y. MoM: -0.1% YoY: 3.8%

Phoenix, Ariz. MoM: 0.7% YoY: 7.2%

Portland, Ore. MoM: 0.7% YoY: 5.8%

San Diego, Calif. MoM: 0.5% YoY: 6.9%

San Francisco, Calif. MoM: 0.5% YoY: 10.7%

Seattle, Wash. MoM: 0.7% YoY: 12.8%

Tampa, Fla. MoM: 0.6% YoY: 6.9%

Washington, D.C. MoM: 0.5%

YoY: 2.9%

Existing Home Sales Continue Slump

Another Month, Another Sales Slump...

For the fourth month straight, existing-home sales slid, the National Association of REALTORS® (NAR) reports. Activity declined 0.7 percent in July, to 5.34 million, down 1.5 percent from the prior year. Inventory rewound, as well, down 0.5 percent to 1.92 million.

📷

“Led by a notable decrease in closings in the Northeast, existing-home sales trailed off again last month, sliding to their slowest pace since February 2016 at 5.21 million,” says Lawrence Yun, chief economist at NAR. “Too many would-be buyers are either being priced out, or are deciding to postpone their search until more homes in their price range come onto the market.”

Just one of the four major regions in the U.S. had higher sales: the West, increasing 4.4 percent to 1.19 million, at a median $392,700. Activity in the Midwest, Northeast and South slipped, with Midwest sales down 1.6 percent to 1.25 million, at a median $210,500; Northeast sales significantly down, 8.3 percent to 660,000, at a median $309,700; and sales in the South down 0.4 percent to 2.4 million.

Currently, inventory is at a 4.3-month supply. In July, existing homes averaged 27 days on market, three days less than the prior year. All told, 55 percent of homes sold were on the market for less than one month.

“Listings continue to go under contract in under month, which highlights the feedback from REALTORS® that buyers are swiftly snatching up moderately-priced properties,” Yun says. “Existing supply is still not at a healthy level, and new-home construction is not keeping up to meet demand.”

The median existing-home price for all house types (single-family, condo, co-op and townhome) was $269,600, a 4.5 percent increase from the prior year. The median price of an existing single-family home was $272,300, while the median price for an existing condo was $248,100.

Existing-home sales in the single-family space came in at 4.75 million in July, a 0.2 percent decrease from the 4.76 million in June, and a 1.2 percent decrease from the 4.81 million the prior year. Existing-condo and -co-op sales came in at 590,000, a 4.8 percent decrease from June and a 3.3 percent decrease from the prior year.

Twenty percent of existing-home sales in July were all-cash, with 13 percent by individual investors. Three percent were distressed.

Additionally, first-time homebuyers comprised 32 percent of sales, an inch up from 31 percent in June.

“In addition to the steady climb in home prices over the past year, it’s evident that the quick run-up in mortgage rates earlier this spring has had somewhat of a cooling effect on home sales,” says Yun. “This weakening in affordability has put the most pressure on would-be first-time buyers in recent months, who continue to represent only around a third of sales despite a very healthy economy and labor market.”

“Despite first-time buyers struggling to achieve homeownership, REALTORS® in most areas say demand is still the strongest at the entry-level segment of the market,” says NAR President Elizabeth Mendenhall. “For prospective first-timers looking to begin their home search this fall, it is expected that competition will remain swift. That is why it’s important to be fully prepared with a pre-approval from a lender, and to begin conversations with a REALTOR® early about what you’re looking for and where.”

Source: NAR

GDP JUMPS 4.1%. BEST PACE IN 4 YEARS

US Gross Domestic Product grew at a solid 4.1 percent pace in the second quarter, its best pace since 2014, boosting hopes that the economy is ready to break out of its decade-long slumber.

The number matched expectations from economists surveyed by Reuters and was boosted by a surge in consumer spending and business investment. Stock market futures edged lower on the news while government bond yields moved lower.

That's the fastest rate of the growth since the 4.9 percent in the third quarter of 2014 and the third-best growth rate since the Great Recession. In addition to the strong second quarter, the Commerce Department revised its first-quarter reading up from 2 percent to 2.2 percent.

"We're on track to hit the highest annual growth rate in over 13 years,"President Donald Trump said in remarks an hour after the report hit. "And I will say this right now and I will say it strongly, as the deals come in one by one, we're going to go a lot higher than these numbers, and these are great numbers."

📷

In addition to the rise in consumer and business spending, increases in exports and government spending also helped. Personal consumption expenditures rose 4 percent while business investment grew 7.3 percent and federal government outlays increased by 3.5 percent.

Exports rose in part as farmers rushed to get soybeans to China ahead of expected retaliatory tariffs to take effect in the coming days. Declines in private inventory investment and residential fixed investment were the main drags, the report said.

The tariffs as well as last year's massive tax cut both were key factors in the growth.  "Bottom line, if it wasn't for a big upside to inflation, GDP would have been much better because of the upside in spending, boost in exports and government spending which offset an unexpected sharp decline in inventories and no change in gross private investment," said Peter Boockvar, chief investment officer at Bleakley Advisory Group.  "We hope capital investment continues to improve in light of the tax incentive to ramp up," he added. "The consumer has tax cuts and higher wages on one side and a low savings rate and a recent credit card binge on the other."

In recent days, White House officials had been indicating the reading will be strong.

President Donald Trump himself tweeted a few days ago that the U.S. has the "best financial numbers on the planet," while National Economic Council Chairman Larry Kudlow predicted on Thursday that Q2 GDP will be "big."

The administration has used a mix of tax cuts, deregulation and spending increases to goose growth. White House budget director Mick Mulvaney told CNBC earlier this week that deregulation likely has had the most impact so far as companies feel more comfortable about committing capital.

The next question will be whether the growth spurt is sustainable. There were several jumps in GDP under former President Barack Obama. That Q3 increase in 2014 was preceded by a 5.1 percent rise in the second quarter. But by the end of 2015, growth had slowed to 0.4 percent. Federal Reserve officials forecast GDP to rise 2.8 percent for all of 2018 but then to tail off to 2.4 percent in 2019 and 2 percent in 2020.

Some economists worried that the jump in consumer spending for the April-to-June period may not be sustainable, adding to skepticism that the gains will continue.

"Personal consumption would need to keep up with this impressive pace to see a solid second half," said Ian Lyngen at BMO Capital Markets.

Economists generally expect the trade war between the U.S. and China to temper further growth. Trump has slapped 25 percent duties on $34 billion worth of Chinese imports and has threatened $200 billion more. The administration also has put tariffs on steel and aluminum.

However, more recently the administration said it has made progress on trade agreements with the European Union.

In a recent forecast, Goldman Sachs said the effects from trade disputes are "typically modest," shaving about 0.2 percent from output.