Home prices in March, thus somewhat dated and reflecting just the beginning of the important spring transaction season, rose .66% y/o/y following a 2.1% rise in February according to S&P CoreLogic. The comparisons were very tough as prices rose 21% in March 2022 which came after rising by 13.5% in March 2021. One has to go back to 2012 to see the last time home prices were little changed and which of course followed the sharp drop. From a m/o/m standpoint, home prices rose for a 2nd month by .4% and follows a string of declines. To this, S&P said “Two months of increasing prices do not a definitive recovery make, but March’s results suggest that the decline in home prices that began in June 2022 may have come to an end. That said, the challenges posed by current mortgage rates and the continuing possibility of economic weakness are likely to remain a headwind for housing prices for at least the next several months.”
The cities with the quickest pace of gains continues to be in the sunbelt, Miami, Tampa, Charlotte and Atlanta. The laggards were seen in Seattle, San Francisco, San Diego and Las Vegas.
Bottom line, we know all about the supply constraints with existing homes as high mortgage rates currently have trapped, so to speak, those with much lower mortgage rates in their home. Home construction is certainly trying to fill in that gap as total transactions of about 30% are now filled in by builders vs the historical average is something closer to 10%. This only works though in some markets where land and lots are readily available. In highly dense suburban markets one has to go far out from city centers in order to find communities of new construction. The end result is still an overall subdued pace of housing transactions, though prices remain still high. I guess we can call it a stagflationary situation in at least this sector of the economy.
Home Price Index y/o/y
The Conference Board’s May consumer confidence index was 102.3 and while that was 3 pts above the estimate, it’s down from 103.7 in April which was revised up by 2.4 pts. This compares with 104 in March, 103.4 in February and 106 in January. Both the Present Situation and Expectations components were lower m/o/m. One yr inflation expectations fell one tenth to 6.1% and that is the smallest since December 2020. That compares with 5% in the 20 yrs leading into Covid.
The answers to the labor market questions softened. Those that said jobs are Plentiful fell to the lowest since April 2021 and those that said they are Hard to Get rose to a 6 month high. Also, those that see ‘more jobs’ in the coming 6 months fell to the least since May 2016. Income expectations though did rise .5 pt.
With regards to spending intentions, after falling by 1 pt last month, plans to buy a vehicle rose .9 pts. Plans to buy a home was little changed. Plans to buy a major appliance did bounce by almost 4 pts.
In terms of the age and income distribution, the Conference Board said “While consumer confidence has fallen across all age and income categories over the past three months, May’s decline reflects a particularly notable worsening in the outlook among consumers over 55 yrs of age.”
Bottom line, the weakness in the current jobs situation and expected employment weakness was the notable take. Spending intentions though held in as inflation expectations receded again.
Consumer Confidence
One yr Inflation Expectations
Those that see ‘more jobs’
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