Case-Shiller Home Price IndexPosts Largest Monthly Increase Since 2005

Firmer readings on home sales have given a lift to home prices. During July the S&P/Case-Shiller Home Price Composite Index of twenty metro-markets rose 1.2% from June and that was the firmest gain since late-2005. The monthly increase eased the y/y drop to 13.3%, less than expected. Still, prices were down by nearly one-third since the peak in May 2006. The July gain left prices down less y/y than the expected 14.2%. Not seasonally adjusted prices were even stronger m/m and posted a 1.6% increase after a 1.4% June gain.

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. An overview of the S&P/Case-Shiller home price series can be found here.· The Case-Shiller composite index of home prices in 10 metropolitan areas, which has a longer history and dates back to 1987, also firmed last month by 1.3% (-12.8% y/y). 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 (-1.4% y/y) and in Dallas (-1.6% y/y) prices rose for the fourth consecutive month. Prices in Denver rose for their fifth month (-3.0% y/y). Boston prices also were higher during the July (-5.0% y/y) while in Chicago home prices were quite strong m/m and rose 2.1% (-14.2% y/y). In New York prices ticked up 0.9% m/m (-10.4% y/y) while in Charlotte, North Carolina prices were roughly unchanged (-9.0% y/y.)

Weakest Regions: Though home prices in Phoenix, Arizona rose 1.2% m/m they remained off 28.5% y/y. Home prices in Las Vegas, Nevada continued their rapid rate of decline with a 1.9% m/m drop (-31.4% y/y) and also were down by roughly one-half from their peak. Home prices in Miami edged up (-21.2% y/y while home prices in Los Angeles also firmed (-14.9% y/y). In Tampa, ticked higher for the second month but remained off 18.5% y/y. In Detroit, the monthly rate of price decline also eased considerably (-24.7% y/y) but prices were off by early one-half from the peak. In San Francisco prices firmed for the second straight month and that eased the y/y decline to 17.9%.

The Credit Crisis and Cycle-Proof Regulation from the Federal Reserve Bank of St. Louis can be found here. 

The pump price for regular gasoline fell last week to the lowest level since late-July. At an average $2.50 per gallon the price dropped a nickel from the prior week and may have broken out of the sideways pattern since early-June. These prices compare to the December low of $1.61. Yesterday, prices fell further. The wholesale gasoline price was down to $1.65 per gallon. Prices had reached a high in early-August of $2.03. The figures are reported by the U.S. Department of Energy and can be found in Haver's WEEKLY & DAILY databases.

During August, the consumer price index for gasoline recouped the July decline with a not seasonally adjusted 3.3% increase. Seasonally adjusted gas prices were quite firm and rose 9.1% m/m, up 40.3% YTD.

Crude oil prices have led the decline in refined product prices. Light sweet crude oil prices (WTI) fell to $68.41 per barrel, though that still was up from the December low of $32.37. Yesterday, the spot market price for light sweet crude oil fell further to $66.84 per barrel versus a daily high of $71.55 last week.

The demand for gasoline continued to improve through mid-month. The y/y rise of 1.1% was the first meaningful positive comparison since early-2007. Demand for residual fuel oil slacked off from its earlier strength and fell 5.1% y/y while distillate demand is off 13.2% y/y. Finally, oil remains plentiful as evidenced by a 16.5% y/y rise in inventories of crude oil & petroleum products. Inventories of gasoline recently have surged  and are up 19.2% versus last year. The figures on crude oil production and inventories are available in Haver's OILWKLY database.

Natural gas prices increased again last week to an average of $3.48 per mmbtu (-54.9% y/y) but they remained down by three-quarters from the high reached in early-July of last year of $13.19/mmbtu. Yesterday prices were up from last week's level at $3.54/mmbtu. 

The Conference Board indicated that consumer confidence during September dipped from August. Though both figures were up sharply from the February low, the trend in the series has been roughly sideways since May. The Conference Board data can be found in Haver's CBDB database.

During the last ten years there has been an 86% correlation between the level of consumer confidence and the y/y change in real consumer spending.

Consumers' assessment of the current economic conditions fell again this month and remained near the historic low. It remained off by almost two-thirds from one year earlier. Jobs were seen as hard to get by an increased 47.0% of respondents and jobs were seen as plentiful by 3.4% which was near the series' historic low. Business conditions were seen as good by just 8.7% and that also was near the series' low. Consumers who thought business conditions were bad rose slightly to 46.3%. While off somewhat from its high the reading still near the highest since 1983.

The expectations component of confidence slipped from August but the index remained near the highest level since late-2007. The percentage of respondents expecting business conditions to improve slipped to 21.3% though that remained near the highest level since 2004. A much reduced 15.0% expected conditions to worsen. That was off from the recent February high of 40.7%. An improved 17.9% of respondents expected economic improvement to generate more jobs, more than double the percentage at the recent low.

Expectations for the inflation rate in twelve months fell back to 5.2%, the lowest level since 2007 and down from last year's high of 7.7%. Interest rates in twelve months were expected to be higher by 48.8% of respondents, while 14.8% expected rates to fall. A greatly increased 35.4% of respondents expected stock prices to rise.

Consumers continued to manage their spending plans cautiously. Just 2.3% plan to buy a home during the next six months while 23.8% plan to buy a major appliance. That's versus 30.9% back in 2007. Only 4.4% plan to buy an automobile versus 6.0% in 2007. Just 2.1% plan to buy a new one.

Is The Financial Crisis Over? A Yield Spread Perspective from the Federal Reserve Bank of St. Louis is available here.

Eurostat reported today that its economic sentiment indicator (ESI) for September rose to 82.8 from 80.8 in August. The measure has now risen in the last five months from the low of 64.6 reached in March. Although it is still below its long term average of 100, the improvement that has taken place in the indicator suggests that economic activity in third quarter is likely to be positive for the Euro area as a whole. The attached chart of the month to month changes in the ESI and the quarter to quarter changes in GDP shows that the change in the ESI is a good predictor of subsequent changes in GDP.

Another indicator of rising sentiment in the Euro Area is the "EuroCOIN" indicator that was released a few days ago. This is a monthly indicator of GDP that, according to its authors, the Bank of Italy in collaboration with the Centre for Economic Policy Research, is "a real-time estimate of underlying trend of GDP. i.e. growth adjusted for short term fluctuations." The EuroCOIN indicator has been rising since January of this year and was slightly positive at 0.07 in September, the first time it was positive since June 2008. The second chart compares the EuroCOIN indicator with the changes in real GDP and like the ESI suggests an ending of the recession in the third quarter for the Euro Area as a whole.