United States' Home PricePerformance All Over The Map

Recent signs of stability in home sales and construction hold promise that deflation in home prices is abating. Of course, that depends on whether the only reason for pricing improvement is due to the increased affordability of housing created by past price declines. Positive growth in jobs and income would support a more lasting bottom in pricing power ... then growth in housing sector activity. States' home price data in the table below is arranged by highest-to-lowest y/y change during all of last year. The difference between the state with the best performance (Texas) and the worst performance (Nevada) is a huge twenty percentage points. Versus 2007, the rate of price change slowed throughout the country, but nowhere was it more pronounced than in California; to a 17.2% rate of decline from negative 4.7%.

Through the third quarter of this year, home price declines occurred in all but a few states. For the country as a whole home prices fell another 4.1% y/y during 3Q after the 2.7% decline during 2008. So far this year, however, the rate of price decline has stabilized. The good news was that the rate of price deflation both in Florida and California slowed versus 2008. In fact, the rate of home price decline halved in California. Alabama, North Carolina and Indiana are three states where earlier stability in home prices gave way to deflation. Past stability was, however, tenuous as price appreciation already had slowed appreciably. In Texas, Nebraska and Louisiana home price gains all but disappeared.

Where home prices go from here clearly is a hard call. And as individual states' recent performance indicates, much of the story may be local. Is there a heavy concentration of certain industries in the state such as finance or defense, or were a state's home prices inordinately influenced by speculative forces. Home Prices: A Case for Cautious Optimism from the Federal Reserve Bank of St. Louis is available here.

The latest report from the Federal Housing Finance Agency can be found here.

The states' home price figures can be found in Haver's REGIONAL database.

The U.S. economy seems to be regaining forward momentum. That is the indication from the Chicago Fed National Activity Index (CFNAI) from the Federal Reserve Bank of Chicago. The index improved during November to a reading of -0.32. That gained back the declines during the prior three months and pulled the index level to its highest since November 2007, up from the series' low of -4.13 reached this past January. Since 1970 there has been a 74% correlation between the level of the index and the q/q change in real GDP but during the last ten years that correlation has risen to 80%.

The three-month moving average which smoothes out some of the volatility of the index also improved to near its highest level since February of 2008.

An index level at or below -0.70 typically has indicated negative U.S. economic growth. A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth of roughly 3%. The complete CFNAI report is available here.· The Chicago Fed indicated that 36 of the series' individual indicators made positive contributions to the November index while 49 made negative contributions. The CFNAI is a weighted average of 85 indicators of economic activity. The indicators reflect activity in the following categories: production & income, the labor market, personal consumption & housing, manufacturing & trade sales, and inventories & orders.

In a separate survey, the Chicago Fed indicated that its Midwest manufacturing index improved modestly during October to its highest level since the June low. Indicators for the auto, steel, machinery and resource sectors each improved. The Chicago Federal Reserve figures are available in Haver's SURVEYS database.  

Japanese balance of trade continues to improve in spite of the high and rising yen. In November the seasonally adjusted trade balance was 492.4 billion yen, up from the low point reached in January, 2009 when the balance was a negative 478 billion yen and it is now at the highest level since April 2008 when the balance was 660 billion yen.

Exports reached a peak of 7,591.4 billion yen in January, 2009 and declined to 3,983.0 in February, 2009. Since then, they have risen to 4,998.0 billion yen. Imports reached a peak in August, 2008 at 7, 209.l and declined to 4.030.6 billion yen in June, 2009. Imports have since recovered to 4,506.1 billion yen. The trends of exports, imports and trade balance are shown in the first chart.

Data on trade by area are not seasonally adjusted. As a result, trends in these data are best shown by the year over year changes. The year to year changes for Japan's trade with Asia, Western Europe and the United States are shown in the second chart. The year to year change in the trade balance with Asia is the most striking. It has been positive and increasing since September of the year. The year to year change in the trade balance with Western Europe is still negative, but the magnitude of the difference, -44.5 billion yen, is greatly lower than the -246.4 billion yen recorded in August. 2009. The year to year change in the trade balance with the United States has also improved and, for the first time in over two years, was positive.