Better Pricing News on the Housing Front
With some pretty bleak Case-Shiller data announced earlier this month, one might be surprised that some housing price data have been looking up according to last week's releases. The Federal Housing Finance Administration indicated that home prices increased 0.8% in April following a 0.4% decrease in March. This represents the first increase since May 2010. Over the last year, prices have fallen by 5.7%. Both the monthly and year-over-year data are not uniform across. Yearly data ranged from down 10.9% in the Mountain Region (including Las Vegas and Arizona for starters) to a minuscule 0.7% decrease in the West South Central Region (including Texas, one of the lowest-unemployment states in the nation). The month-to-month data ranged from positive 2.2% in New England to negative 1.3% in the Mountain Region.
Eric Landry also likes to look at real-time listing prices from the MLS, and those numbers are looking up:
In the face of weak sales, it does appear median listing prices are enjoying some modest strength of late, a dynamic that will likely translate into higher Case-Shiller prices over the coming months. If a firming in prices can somehow translate into a jolt of confidence, the market may have a chance to scrape itself off the canvas after a very tough number of years. It will be interesting to see how modestly increasing Case-Shiller indexes are received by the housing market, the media, and investors (Case-Shiller Prices are due out again on Tuesday. Keep in mind that the Case-Shiller numbers are a three-month moving average, so they mathematically can't look as robust as the FFHA numbers).
Consumer Expenditure and Income Numbers Should Look Soft on Monday
Given weak employment data reported a month ago and a negative retail sales report from the Census Bureau, its hard to argue with the consensus forecast of 0.1% income growth and a 0.1% decrease in spending. The poor spending number will be driven primarily by low auto sales in May due to short supply and high prices. It will be interesting to see whether the government will formally break out the effects of autos on the report. The income report will reflect the large slowing in employment growth experienced in May (from 251,000 jobs down to 88,000 jobs).
I am not convinced that May employment is indicative of the strength of the labour market. A huge swing in retail jobs is the key reason for my suspicion. The household survey showed an acceleration in job growth in May, not a deceleration as shown by the poll of business establishments, raising further questions about the May report. An improved layoff report from Challenger Gray and Christmas and strong hiring plans were laid out in a recent Manpower report.
I believe a consumer spending and income report that shows little if any growth in May could be the catalyst that brings in some of those second-quarter GDP forecasts that look a little rich. The potential reductions may provide more ammunition for bears to push the market lower. Remember that most of the potential bad news has already been reported in different venues. Consider these data to be an echo, not new news. There is always the chance that new and previously undisclosed data in the report (dividend income, rents, small business income) could outstrip the negatives that we already know. That would be a pleasant change.
Case-Shiller Home Price Data Should Look Better; Purchasing Manager Data Could Disappoint
As I outlined above, I think the Case-Shiller home price report is likely to surprise with results very close to flat, if not a small increase after months of decline, based on a similar survey already released. Also, as mentioned earlier, the National PMI is due Friday. The regional reports suggest a dip below the critical 50 level is a possibility. Given Toyota's extremely recent ramp up and stronger durable goods orders (that may come too late in the measurement period to have an effect), I wouldn't be too concerned about this one report. The Chicago PMI report from the day before (Thursday) the National Report (Friday) may provide clues about how bad the national report will be.
Auto Sales Still Under the Gun
After several months above the 13 million unit sales level (seasonally adjusted annual rate), sales slumped to a disappointing 11.8 million units in May as low supply and high prices took their toll. As some of the supply problems softened in June, the market believes sales could stage a small rebound in June at 12.2 million units.
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