Morning Report: Nominal versus real house prices 5/31/17

Vital Statistics:

Last Change
S&P Futures 2416.3 5.5
Eurostoxx Index 392.1 1.6
Oil (WTI) 48.6 -1.1
US dollar index 88.6  
10 Year Govt Bond Yield 2.21%
Current Coupon Fannie Mae TBA 102.6
Current Coupon Ginnie Mae TBA 103.81
30 Year Fixed Rate Mortgage 3.98

Stocks are higher this morning on good overseas economic data. Bonds and MBS are up small.

Mortgage applications fell by 3.4% last week as purchases fell 1% and refis fell 6%. Mortgage rates barely moved last week. We continue this up/down, up/down pattern.

Pending Home Sales fell 1.3% in April, according to the NAR. Rising prices plus falling affordability are translating into lower sales for the second straight month. Sales are below a year ago. While building (or lack thereof) continues to be a problem, professional investors who are still paying the REO-to-rental trade are not selling.

JP Morgan and Bank of America warned this morning that Q2 numbers will be lower than a year ago. A flattening yield curve, along with a lack of volatility is hurting results. The S&P Financials SPDR (XLF) is down about 1.5% this am.

Economic confidence continues to give back its post-election gains, but is still better than it was pre-election. For the past week, 33% of respondents rated the economy as “excellent” or “good”, while 22% rated the economy as “poor.”

You hear people sometimes worry about another bubble because home prices have reached their prior peaks. Set aside the argument that bubbles are exceedingly rare psychological phenomenons that only come around every few generations for an asset class. Are home prices really back at bubble levels? If you look at the home price indices like Case-Shiller or FHFA, the answer is yes. However, those indices use nominal (i.e. non-inflation adjusted) prices. And while inflation has been low over the past 10-15 years, it hasn’t been zero either. On an inflation-adjusted basis, home prices are still about 14% below peak levels. Compare the two charts below, one with nominal prices and the other with inflation-adjusted prices:


house prices nominal


house prices real

You can see that home prices are still elevated compared to historical averages, but they aren’t back at bubble levels. Housing has definitely increased in price on an inflation-adjusted basis since the mid-70s, however improvements in financing (interest rates, different products etc) have increased people’s buying power and that may account for some of the increase.

46 Responses

  1. Kathy Griffith’s sin was to not recognize that flabby leftism in art is no longer edgy or shocking. It is boring and causes most people to roll their eyes as opposed to hitting their fainting couches…

    Liked by 1 person

    • I don’t think it’s any more offensive than Colbert’s “cock holster” comments. Why one gets pilloried and the other is still a member of The Resistance in good standing escapes me.


    • Kathy Griffin’s sin was she put certain people (CNN especially) in an untenable position. She made them do something they wouldn’t have otherwise ever wanted to do—bow to the will of Trump supporters/Republicans/anyone who thinks the pic was tasteless—because she did it all so publicly. If it had been a private thing she could have shared with all of the CNN execs on the down low there would have been no problem.

      I remember when the “hanging Obama in effigy” was, like, the worst thing anyone could ever have done, ever. And it was classless. But Griffin took it to a whole new level.


      • The analogy to hanging BHO in effigy is apt, I think.

        Beheading is the chosen execution tool of AQ and ISIS and thus puts her immediately in that box, which is like being in the racist lynch mob box. What I mean is that these boxes are part of our cultural understanding and we all know the symbolism when we see it.

        JNC, I liked Scott Adams unusual take but I think he either carried it too far or missed the notion of three movies – because many of us would just see either hanging a president in effigy or cutting off his head as repugnant morally and politically, regardless of how much we disliked him.

        That a comedienne and her band of merry writers thought it was outrageously funny seems daft to me.

        CNN probably did the right thing, Kev, since I would have canned her if I were CNN.


        • Indeed. It was a weird box to electively put herself in, too. I get having your own strong and possibly extreme opinions, but not to predict the likely fallout from that move seems remarkably tone-deaf, to me.


        • Not unless you’re in a bubble.


        • Re: Scott Adams:

          For Kathy and her associates at the photoshoot, this photo was intentionally provocative, but in a silly way. In their movie, beheading the Hitler-monster is a widely-approved fantasy. Perfectly acceptable. Nothing to see here.

          This sounds entirely plausible to me. Not because Trump is seen as a unlikeable politician, because he is seen as a Hitler-monster, and depicting him as decapitated is no different than the gory murder of Hitler in Tarintino’s Inglorius Basterds. They put it in that category.


        • I thought this was spot on about holding up a mirror to the Trump critics:

          “Persuasion-wise, Griffin’s photo was so over-the-line that I assume it ruined the movie for a lot of people following the anti-Trump script. The audience in Griffin’s movie just had a mirror held up to them. If they liked what they saw, they will stay in their seats. If they don’t like being the villains in their own movie, they might change the channel.”


  2. Brent Bozell is getting his David Brock on….


    • Late to the party. Most people have either picked a side consistent with their religiously held political beliefs, or lump the media together as one big pile of worthless garbage. Might get some advertisers to pull out of some shows, but I’m dubious there will be a lot of that.


      • USAA backed down after dropping Hannity. They got a lot of negative feedback..

        As I said before, virtue signalling from corporate america is foolish. You probably piss off 5 times the number of people you please…


        • Brent:

          You probably piss off 5 times the number of people you please…

          I’d like to think that is true, but the increasing number of corporations that seem to be engaging in it makes me wonder.


        • I’d like to think that is true, but the increasing number of corporations that seem to be engaging in it makes me wonder.

          They are starting to hear about it at stockholder meetings…


  3. JNC — any endorsements for the gubernatorial and Lt. gov primaries in 2 weeks?


  4. Worth a read:

    “Don’t Over Connect the Dots on Jared Kushner’s Russia Dealings
    May 31, 2017 | Michael Morell”


  5. This does not feel like a bubble.

    My close friend who is an experienced and well qualified appraiser started bitching in 2005 about banks pressuring for higher appraisals. By mid 2006 he was limiting his appraisal load because he would not dummy up valuations based on desire. By late 2006 he was predicting bubble/crash.

    Not now. At least in Texas there is simply a shortage of new construction and existing homes are in high demand. Growth in the SA, Austin, Houston, and DFW metros continues to be the fastest in America, I think. Jobs and population are expanding ahead of housing.

    In the S&L bubble of the 80s and the 2005-07 bubble housing starts were booming, ahead of actual population growth. The prices were rising on hype more than on demand/supply, or so it seems in hindsight. The 80s boom/bust especially left a glut of unfinished homes. No new homes would go empty for 30 days in Austin right now.


    • i was expecting an anonymous source. he’s a target now! not that the Hillary people know anything about targeting D voters. Zing!

      Liked by 1 person

    • At the bottom of jnc’s link to the DNC story, this link caught my eye:

      Former Playmate sentenced for Snapchat body-shaming of naked woman at gym

      Los Angeles City Attorney Mike Feuer, who handled the closely watched case, said in a statement: “The issues that surround body shaming can be devastating — not only to daughters and mothers, but also to sons and fathers, members of the LGBTQ community, to a trans kid who might be struggling with identity, to people who are disabled. The message today is clear: body shaming is not tolerated in the City of Los Angeles.”

      And here I thought the law that was broken related to privacy, not “body-shaming”. Does LA tolerate secretly taking and publishing photos of naked people in a locker room provided the people are hot and are not being shamed?

      Also worth noting, apparently Feuer is unaware that “daughters and mothers” along with “sons and fathers” pretty much covers the gamut. Identifying specific victim classes is just redundant at that point, but apparently necessary in this twilight zone of a world we live in. I guess that secretly taking and publishing pictures of someone in a locker room isn’t itself bad enough, but only reaches peak badness because of how it might effect gays, lesbian and transgenders.

      Would that this incessant virtue-signalling was at least as socially stigmatized as body-shaming is.

      Liked by 1 person

    • I wonder what it is like for WJC at home. If he goes home at the same time she is there, I mean.

      His was one of the voices who warned her campaign that it was figuratively if not literally focused on the crotch when it should have been focused on the economy, especially in the rust belt.

      When I say focused on the crotch, I mean both upon gender issues and upon “DJT is a woman hater” issues. As never mentioned background noise that was OK – probably a positive – but the focus on that when people were scared of their jobs being made redundant was at best ridiculously annoying, and at worst damned insulting.

      So does she have the common decency to offer to [say] give good head to him for the rest of his life? I doubt it.

      I’ll bet that when he is around she tells him how disloyal he was for criticizing her strategy which she had been working on since Wellesley, to get everyone like herself out to the polls.

      I’ll bet he isn’t around much.

      Yes, if I had lived in a close state I would have voted for her. Which only shows how little regard I have for DJT. I believe that Johnson-Weld was the best ticket last November. Not arrogant. Not unstable. Not untrained in government. Not without human decency. Relaxed [maybe a bit too relaxed in GJ’s case], smiling, and accustomed to making friends in politics, rather than pissing everyone off, even prospective allies.
      Speaking of pols who piss off their prospective allies, imagine a Warren v. Cruz race. The rest of the Senate would be relieved they were gone.

      Liked by 1 person

      • That’s basically the conclusion that NoVA & I came to.

        Trump was too big a downside risk. Plus with a likely Republican Congress, the damage from HRC could be contained.


      • “So does she have the common decency to offer to [say] give good head to him for the rest of his life? I doubt it.”

        That’s a thing guys hope would happen but pretty much never, ever does. 😉

        I expect WJC is in that same class. But there are probably other ladies to step into the gap in his case.


        • Apparently Hillary isn’t all that into guys… Which is why she didn’t get all bent out of shape over Monica…

          Marriage of convenience: She rides Bills political coattails, Bill gets to be a hound dog..


        • well, the rumor through friends at the fire department, who have friends in “DC area law enforcement” that WJC’s has a friend with the secret service codename of “sunshine”

          Liked by 1 person

      • Same conclusion I came to. If I thought there was a chance in heck Tennessee would be a swing state, I probably would have voted for HRC. I already knew it would go Trump, so I voted Johnson. For, not “with my”, but the thought did occur to me.


      • Mark:

        Yes, if I had lived in a close state I would have voted for her.

        CT was never going to anyone but the D, so I too had the luxury of submitting a vanity vote (go Barry Goldwater!). But had I not had that luxury, my vote would have been explained by 3 simple words….Associate Justice Gorsuch. If SCOTUS is not rescued from the likes of RBG and the Wise Latina – and an HRC presidency would have set the task back by decades, if not forever – then frankly it really doesn’t matter who the president is. The nation would be (and still might be) doomed anyway.

        Liked by 1 person

        • For me, same thing (NY) but I voted for GJ. In all honesty, I would rather have DJT than Hillary simply for the regulatory relief and the courts.

          Liked by 1 person

        • Trump isn’t an actual small government conservative. He’s mostly abandoned his populist program, but when he ran it was all about spending more on Medicare, getting rid of free trade, etc. The chance that he would actually do that was part of the downside risk.

          One thing to keep in mind about the SCOTUS is that it’s on the path to losing enough legitimacy that it won’t matter who is appointed, because you’ll start seeing open defiance of it’s rulings, on both the right and the left.

          Liked by 1 person

        • jnc:

          Trump isn’t an actual small government conservative.

          I know. Surely you remember my rants about Trump during the primaries, and recall that I quite the R party over him. My biggest problem with Trump has always been his complete lack of any coherent ideology. But I’ve always rated the chances that he would have better SCOTUS appointees than HRC or any other D to be pretty high. And on the evidence so far, that seems to be correct.

          One thing to keep in mind about the SCOTUS is that it’s on the path to losing enough legitimacy that it won’t matter who is appointed, because you’ll start seeing open defiance of it’s rulings, on both the right and the left.

          That could very well be true, but for the most part the left won’t have to defy SCOTUS, because generally speaking a right leaning SCOTUS won’t be imposing policy on the left. A right leaning SCOTUS won’t prevent the left from achieving policy victories. It will simply force the left to win them in the political arena (if they can) rather than in the courts.


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