I was on BNN Headline with Howard Green this afternoon talking to Howard and Rob Cox about the housing data, earnings and tomorrow’s Fed press conference. Let me add a bit of colour on housing here and link o the videos below.
Here are the figures for February 2011, the data released today:
You can see that on a non-seasonally adjusted basis 19 of 20 markets were down month-on-month, with Detroit being the only market that was up in February 2011. Washington D.C. was the only market up on a seasonally-adjusted basis. Year-on-year, we see a decline of 3.3% with Phoenix being the hardest hit and Boston doing the best. No markets showed year on year price increases. This is what the graphs of the price progression look like:
A lot of people have ben talking about the housing double dip today. The year-on-year data has been negative for a few months now so I have said we were in the midst of a double dip since late last year. How low will house prices go in the US? History says we usually overshoot on the downside and prices are still somewhat above the long-term trendline. So that suggests we have a bit before we reach bottom. With the overhang of inventories, you can bet house prices will be stagnant or lower for a long time to come.
The interesting bit that we talked about on BNN is how the consumer confidence data were up. But that doesn’t mean anything. Back in January, I wrote the following headline: Housing bad, Consumer confidence good… What gives? It was the same situation then.
- Consumer confidence is up but not high. So consumer confidence is again above the depression-like lows we experienced in 2009. For example, the Conference Board’s Consumer Confidence Index rose to 60.6 yesterday, above expectations. However, this is a far cry from 90, which is generally considered the number associated with a healthy economy.
- Housing remains weak. As I indicated in April, the global economy was set to roll over for a early-to-mid-cycle slowdown. As this slowdown took shape, it wasn’t apparent how far it would go i.e. double dip or just a marked slowing. In line with this slowing was the loss of altitude in the housing market after the housing stimulus expired. The numbers now being released by the Case-Shiller housing index, while awful, are actually from that specific time period when the US economy’s growth rate was slowest. Let’s not beat around the bush though; housing is double dipping as we speak. And that means record foreclosures complicated by fraud and legal battles over those foreclosures. This is a huge drag on the economy.
We are three months further along into recovery, but the picture is exactly the same. For more of our commentary on housing click on the picture below. We also discuss the Fed and earnings reports. The video segments run in two parts.