Case-Shiller Home Price IndexDecline Eases

The declines in home prices are moderating. That's the message from May's 0.2% seasonally adjusted decline in the S&P/Case-Shiller Home Price Composite Index of twenty metro-markets. The moderation eased the y/y drop to 17.1% but prices still were down by nearly one-third since the peak in May 2006. The May decline in prices was less than the expected 17.9% y/y drop, and not seasonally adjusted, prices even posted an increase of 0.5% for the month.

The Case-Shiller index of 20 U.S. cities and their surrounding areas is value-weighted. A greater index weight is assigned to more expensive homes and the series dates back only to 2001. The S&P/Case-Shiller home price series can be found in Haver's USECON database and the city data highlighted below is in the REGIONAL database. Here is a link to the latest press release from Standard & Poor's. An overview of the S&P/Case-Shiller home price series can be found here.

pThe Case-Shiller composite index of home prices in 10 metropolitan areas, which has a longer history and dates back to 1987, also fell a lessened 0.2% last month and was down 16.8% year-to-year. This measure also was down by nearly one-third since the 2006 peak.

Less Weak Regions:   Home prices in some areas of the country have firmed lately though they remain down year-to-year.  In Cleveland, Ohio prices rose for the second month (-6.2% y/y) and in Dallas prices rose slightly m/m as well (-4.2% y/y). Prices ticked up 0.3% in Denver (-4.6% y/y).  Boston prices also ticked higher during the month (-7.2% y/y) and in Chicago home prices rose slightly (-17.5% y/y). In New York prices slipped m/m (-12.2% y/y) and are off roughly 20% from their 2006 peak. In Charlotte, North Carolina prices also continued down but just moderately (-10.1% y/y.).

Weakest Regions: Home prices in Phoenix, Nevada were quite weak and fell another 1.7% m/m (-34.2% y/y. Home prices in Las Vegas, Nevada continued their rapid rate of decline with a 3.1% m/m drop (-32.0% y/y, and also were down by roughly one-half from their peak. Home prices in Miami again fell a hard 1.1% (-25.1% y/y while home prices in Los Angeles continued to fall sharply (-19.8% y/y). In Tampa, the rate of monthly price decline slowed slightly to just 0.5% but prices still were off 20.8% y/y. In Detroit, the monthly rate of price decline also eased considerably (-24.5% y/y) but prices were off by early one-half from the peak. In San Francisco prices rose 0.7%, but remained off 26.1% y/y.

Released last week was the House Price Index (HPH) from the Federal Housing and Finance Agency (FHFA). The index rose 0.9% from April for just the third monthly increase since 2005. Year-to-year, that was enough to lessen the decline in the nationwide average of home prices to 5.6% from its worst reading of -8.9% last November. The FHFA uses data provided by Fannie Mae and Freddie Mac. The series differs from Case-Shiller in that it is not value-weighted, it covers a greater area and it has a shorter history.

Signs that the worst of the downtrend in the U.S. economy may have passed helped stabilize the earlier weakness in the oil market. The pump price for regular gasoline increased last week to an average $2.50 per gallon, though that still was down nineteen cents from last month's high. The increase added to the eighty cent (55%) rise from the December low. At $1.87 per gallon in the cash market, gasoline prices yesterday continued to rally off the early-July low of $1.60. The figures are reported by the U.S. Department of Energy and can be found in Haver's WEEKLY & DAILY databases.

Crude oil prices also recovered last week. Light sweet crude oil prices (WTI) increased to $64.99 per barrel, up $3.72 from the low. Yesterday the spot market price for light sweet crude oil recovered further to $68.38 per barrel. Prices had reached a daily high of $72.68 earlier in July.

Natural gas prices rose slightly for the second week. Last week's average price of $3.49 per mmbtu (-64.8% y/y) was down by three-quarters from the high reached in early-July of last year of $13.19/mmbtu.

Financial Stress: What Is It, How Can It Be Measured, and Why Does It Matter? from the Federal Reserve Bank of Kansas City can be found here.

Confidence is UP! Consumer confidence in Italy is at its highest since November 2007. Still since January 1992 the reading stand is at the 40th to 41st percentile of its range and in terms of the ranking among all previous observations. This it is some 10 percentage points below its middle position in terms of range or ranking percentiles. Ranking percentiles position a reading in a queue of values while range percentiles position the reading in a range bounded by the high and low readings. Both readings have some merit.

Past 12 month - Rating the past twelve months, the overall situation is rates as a -68 which puts it in the 55th percentile in terms of rankings. Prices trends at -48 are the worst in this period by either range of ranking methods.

The expected future - Looking ahead the next twelve months overall situation is assigned a value of +2 leaving it in the top 92nd percentile by ranking, but only the 65th percentile according to the position of the reading in its range. Obviously among all rankings this reading is relatively strong but there must be a strong reading that lies at a much, much higher level to depress the range reading so much. That would be a reading from June 2001, as from April to Sept of 2001 readings on this score soared then dipped back to a more normal range. Unemployment readings are still elevated at a +8 reading. That leaves the reading in the moderated 55th percentile by range but at a much higher 94th percentile by ranking. Those two readings tell us that the unemployment reading is rarely higher than this but it has spiked much higher in the past. The response to the household budget situation remains weak by any measure at a +1.

Current/Future comparisons - Households assess their current and future situations as about to be much improved in the next twelve months with their range and ranking percentile readings rising from a bottom quarter or third position currently to a 50% to two-thirds position in the outlook. Current savings are considered high, future savings are expected to be low. Similarly, major purchase environment was construed as middling over the past 12-months abut is expected to improve sharply to top 4% or better in the future.

Summing up - On balance these responses by Italian households show a clear disappointment with past trends. In that respect the expected future improvement is harder to read. Some of the future readings are more middling some are strong. It is still not clear if consumers simply are optimistic that things will improve from the dregs of the last 12 months or if things are expected to improved to true strong readings. As current conditions improve we will monitor these future readings and see if they continue to show the strength that some of the categories currently exhibit. If much better conditions are expected then as the current readings improve the future readings should remain high. If the future is simply expected to be ‘normal’ as the current situation normalizes the expectations readings in the survey will recede to a region of boredom.