Morning Report: Home Price Appreciation Stalls

Vital Statistics:

S&P futures4,0419.00
Oil (WTI)77.45-0.47
10 year government bond yield 3.50%
30 year fixed rate mortgage 6.15%

Stocks are higher as earnings continue to come in. Bonds and MBS are up.

House prices fell 0.1% MOM and rose 8.2% YOY according to the FHFA House Price Index. “U.S. house prices were largely unchanged in the last four months and remained near the peak levels reached over the summer of 2022,” said Nataliya Polkovnichenko, Ph.D., Supervisory Economist, in FHFA’s Division of Research and Statistics. “While higher mortgage rates have suppressed demand, low inventories of homes for sale have helped maintain relatively flat house prices.”

The West Coast is experiencing the biggest slowdown, followed by the Mountain States. Some of these MSAs like Boise became completely disconnected from the local economy and prices will almost certainly contract to what the local economy can support.

Home prices fell 0.5% MOM according to the Case-Shiller Home Price Index. “November 2022 marked the fifth consecutive month of declining home prices in the U.S.,” says Craig J. Lazzara, Managing Director at S&P DJI. “For example, the National Composite Index fell -0.6% for the month, reflecting a -3.6% decline since the market peaked in June 2022. We saw comparable patterns in our 10- and 20-City Composites, both of which stand more than -5.0% below their June peaks. These declines, of course, came after very strong price increases in late 2021 and the first half of 2022. Despite its recent weakness, on a year-over-year basis the National Composite gained 7.7%, which is in the 74th percentile of historical performance levels. As the Federal Reserve moves interest rates higher, mortgage financing continues to be a headwind for home prices. Economic weakness, including the possibility of a recession, would also constrain potential buyers. Given these prospects for a challenging macroeconomic environment, home prices may well continue to weaken.”

Note the FHFA House Price Index only looks at homes with a conforming mortgage, which means it excludes jumbos and cash-only sales. Since we are seeing a big decline in luxury home sales, that might explain the difference between FHFA and Case-Shiller.

Employment Costs rose 5.1% YOY, according to the Employment Cost Index. Wages and Salaries rose 5.1% while benefits rose 4.9%. Given the Fed’s laser focus on wage-push inflation, this number will be somewhat concerning. That said, the quarterly gain fell from 1.2% to 1.0%. The number was below Street expectations.

Consumer confidence fell in January, according to the Conference Board. “Consumers’ assessment of present economic and labor market conditions improved at the start of 2023. However, the Expectations Index retreated in January reflecting their concerns about the economy over the next six months. Consumers were less upbeat about the short-term outlook for jobs. They also expect business conditions to worsen in the near term. Despite that, consumers expect their incomes to remain relatively stable in the months ahead. Meanwhile, purchasing plans for autos and appliances held steady, but fewer consumers are planning to buy a home—new or existing. Consumers’ expectations for inflation ticked up slightly from 6.6 percent to 6.8 percent over the next 12 months, but inflation expectations are still down from its peak of 7.9 percent last seen in June.”

More evidence of a slowing economy: Shipper UPS reported a decline in revenue in the fourth quarter compared to a year ago. CFO Brian Newman said that 2023 should be a bumpy year, although the second half should be better than the first.

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9 Responses

  1. No comment needed:


    • day late and a dollar short


    • jnc:

      No comment needed:

      It was an interesting critique, and notable for its use of old-style journalism, as contrasted with the type of journalism he was actually reporting on.

      One criticism…in his afterward where he lists his perceived problems evidenced by coverage of Trump, he fails to even note what seems to me to be the biggest problem. And that is the proliferation of activist journalists whose explicit goal is not to inform, but to advocate. He never mentions that some media outlets, after Trump’s election, explicitly announced their intention to approach coverage of Trump in a non-traditional manner.


    • One guy’s take on the CJR analysis of the failures of the media covering Trump and the Russian Collusion Hoax. He ain’t buying it:

      No amount of “painful road of introspection” can fix what the media, conspiring with the Democratic Party and the permanent Washington bureaucracy, did to this country and to American democracy. They beat a terrifying lie — a sitting president as an asset of a foreign adversary — into the public consciousness for more than two years, crippling the political agenda Trump was duly elected to enact and, certainly, aiding in the denial of a second term in office.

      But look! Here’s a renowned journalist giving them a stern talking-to!

      Nobody cares. It’s over. They won. And they’ve never stopped.

      As horrid as the media was pre-Trump, its shortcomings were mostly recognized as “liberal bias.” What they did beginning in 2017 and ever since isn’t bias. It’s dishonest. It’s malicious. It’s evil.

      Gerth even has the nerve to offer the media some cover in his piece, faulting Trump, who, as president, “seemed almost to be toying with the press, offering spontaneous answers to questions about Russia that seemed to point to darker narratives.” That’s a convenient explanation for the two years of breathless, unrelenting headlines and cable news graphics declaring that “the walls are closing in,” “the noose is tightening,” and “we’re at a turning point” of the Russia saga. Remember those? That went on for years. Years.


      • As Taibbi & Greenwald noted, it’s worth the CJR doing an exhaustive review at this level just to see if there’s any reaction from the MSM.

        Instead we get articles like this on tangential issues from the Post’s media beat:

        Or they double down like the New Republic does here:

        “Did the FBI’s Charles McGonigal Help Throw the 2016 Election to Trump?

        The shocking indictments against the former head of counterintelligence for the FBI in New York raise many dark questions.

        Craig Unger/
        February 1, 2023

        In the course of writing two books on Donald Trump’s ties to Russia, the same question occurred to me again and again: How is it possible that I knew all sorts of stuff about Donald Trump, and the FBI didn’t seem to have a clue? Or if they did, why weren’t they doing anything with it?

        Specifically, I knew that:

        Starting in 1980, an alleged “spotter agent” for the KGB began cultivating Trump as a new asset for Soviet intelligence.”

        Because they fundamentally believe this now:

        When someone shows you who they are, believe them.


        • jnc:

          As Taibbi & Greenwald noted, it’s worth the CJR doing an exhaustive review at this level just to see if there’s any reaction from the MSM.

          Sure, I agree. But at some point places like CJR and journalists like Gerth need to accept and acknowledge that the mission they think journalists have, and the mission that journalists themselves think they have, are not the same. Hence, while they think they are critiquing journalists, what they are actually doing is listing what todays journalists will see as successes.

          In other words, I think CJR and Gerth need to heed your advice that, when someone shows you who they are, believe them. They don’t seem to believe that journalists are what journalists are now all but openly proclaiming themselves to be…political activists.


  2. What’s with the lefty obsession with George Santos? I don’t get the Pollyanna, OMG he lied!! Is it just blood in the water? How many politicians can withstand scrutiny on their campaign finances? They all know it’s a business.

    And why are elected Republicans tolerating this from the media or Democrats? What do they think they gain?

    Anyhoo, how can Republicans be accused of being afraid of trannies when we elected one?


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