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Source:
What Homebuyers Purchased In San Francisco In 2011

Retail Sales
-ICSC-Goldman Chain Store Sales, Week/Week +0.1%. Previous was -1.4%
-ICSC-Goldman Chain Store Sales, Year/Year 3.9%. Previous was 2.8%.

-Redbook Store Sales, Year/Year change +2.0%. Previous was +2.5%

-This is a measure or retail sales at chain stores, discounters and department stores.
-These two reports are further indications that consumer spending remains restrained.

Consumer Confidence (January 2012)
Consumer Confidence 61.1 – Previous was 64.5 The weakness was felt most in the jobs market where 43.5% say jobs are hard to get. Again – this is a survey of people’s opinions. Confidence always gets slapped down when gas prices rise.

This data comes from a survey of consumers by the Conference Board. It is supposed to measure predisposition to spend.

Employment Cost Index
-ECI Quarter/Quarter change +0.4%
ECI Year/Year change +2.0%

Chicago PMI
Business Barometer Index – 60.2. Previous was 62.5.

This still shows expansion. We continue to have manufacturing show health while retail wanes. The disconnect between wholesale and retail will be fixed either by retail picking up or wholesale slowing to allow inventory to be sold. This was the same picture we saw in last week’s GDP where the wholesale component of GDP was +2.35% Q/Q while the retail (consumer goods) portion was +1.34%. In the GDP report Consumer Services were even worse at +0.1%.

New Home Sales (December 2011)
-New Home Sales for December were 307,000 (seasonally adjusted, annualized)
-Previous was 315,000. Consensus was 320,000
-Down 2.2% since November, Down 7.3% since December 2010
-Average sale price $266,000
-Estimated 302,000 new homes were sold in 2011, down 6.2% below the 2010 figure of 323,000
-Full report
-No surprise here – this is still weak.

Leading Economic Indicators
-Leading Indicators, Month/Month change +0.4%.

Forget the data here. What is notable is that money supply has been removed from LEI. This goes hand-in-hand with yesterday’s FOMC announcement that short-term rates would stay where they are for at least 2 more years. This is an admission that monetary policy has been ineffective as a stimulation force on the economy. That is, to me, an astonishing admission.

Durable Goods Orders (December 2011)
-New Orders, Month/Month 3.0%
-Ex-transportation, Month/Month +2.1%
-This is indicative of continued growth in manufacturing.

Chicago Fed Index of National Activity
-Index level was +0.17 for December

Kansas City Fed Regional Manufacturing Index
-Level was +7 for December

GDP
I want to correct what I wrote yesterday about the forecast for GDP. The Consumer Metrics index spiked in June-July. Since this seems to lead GDP by three month this indicates a fairly strong (3.5% or more) increase in 4Q2011 GDP. The subsequent slide down in the Consumer Metrics Index indicates a weak 1Q2012.

This week-to-week data is clouded at the start of the year by the Christmas, New Year, and MLK holidays. It can also be affected by winter storms. “Believe me Mr. & Mrs. Smith, I assure you that under that snow is a beautiful 3 bed, 3 bath home.”

Pending Home Sales (for December 2011)
-Pending Home Sales Index, Month/Month -3.5% to 96.6
-Pending Home Sales Index, Year/Year +5.6% vs. December 2010 index level of 91.5
-Even with December decline, November-December numbers were best since March-April 2010
-Full December report
-Pending Home Sales should be a leading indicator for Existing Home Sales (EHS)
-Also, the December EHS report showed that 33% of realtors reported cancelled contracts

FHFA House Price Index (November 2011)
-Price Index, Month/Month +1.0%
-Price Index, Year/Year -1.8%
-The previous index was -0.7% month/month.

The housing market is is the “just barely recovering” mode. It is still cursed by a real oversupply and a substantial shadow inventory of home on which the owners are not making payments.

The SOTU speech (key excerpts here) seemed to indicate that the President was suggesting expanding HARP 2.0 to include refinancing of loans not already owned by FNMA or FHLMC. The problem with HARP 2.0 is that lenders are still reticent to take on loans with LTV > 105%. There are at least two reasons 1) even if the lender is shielded from losses there are significant costs associated with foreclosures. Foreclosures tie up cash. 2) the bad publicity is still implicitly there. Foreclosures have generated enormous losses of cash and enormous negative PR for banks.

The stronger underwriting rules (the “runaround” referred to) have been created not by the banks but by FHFA. The head of FHFA sees as his charter minimizing losses to Treasury on the FNMA/FHLMC portfolio. Those stricter rules are part of the runaround. Blaming the situation on banks may function as an election strategy but those rules are not helping homeowners or the housing market.

Also, it was Congress and the President who funded the Social Security decrease (Temporary Payroll Tax Cut Continuation Act of 2011) with an 0.1% increase in the rate on all mortgages from FNMA and FHLMC. That was not a runaround but more of a direct hit.

-Phil Angelides, former regulator leading financial crisis probes, to run new mortgage firm (Reuters)

-5 Reasons 2012 Will Be Start Of U.S. Housing Recovery (SoberLook via PragCap)

-3 More Charts That Support The Bull Case For Housing (Joe Weisenthal)

-JP Morgan Chase CEO Jamie Dimon: Housing At Bottom (Maria Bartiromo)

-BUT… Dimon also says housing recovery at risk because ‘No One In Charge’ (Bloomberg)

-Economist Tom Lawler (bio): Housing Forecast for 2012 (CalculatedRisk)

-The Fixer Upper Trade—foreclosure remodeling will drive these stocks (Josh Brown)

-Fund Managers Warming To Housing (WSJ)

-LATEST STATS: Home Prices | Existing Home Sales | New Home Sales | Housing Starts

Home prices down 1.4 percent on a month-over-month basis, the fourth consecutive monthly decline. According to the CoreLogic HPI, national home prices, including distressed sales, also declined by 4.3 percent on a year-over-year basis in November 2011 compared to November 2010. This follows a decline of 3.7 percent* in October 2011 compared to October 2010. Excluding distressed sales, year-over-year prices declined by 0.6 percent in November 2011 compared to November 2010 and by 1.6* percent in October 2011 compared to October 2010. Distressed sales include short sales and real estate owned (REO) transactions.

Highlights as of November 2011

-Including distressed sales, the five states with the highest appreciation were: Vermont (+4.3 percent), South Carolina (+2.8 percent), District of Columbia (+2.1 percent), Nebraska (+1.9 percent) and New York (+1.7 percent).

-Including distressed sales, the five states with the greatest depreciation were: Nevada (-11.2 percent), Illinois (-9.7 percent), Minnesota (-7.8 percent), Georgia (-7.7 percent) and Ohio (-7.2 percent).

-Excluding distressed sales, the five states with the highest appreciation were: Maine (+4.9 percent), South Carolina (+4.9 percent), Montana (+3.8 percent), Indiana (+3.3 percent) and Louisiana (+2.4 percent).

-Excluding distressed sales, the five states with the greatest depreciation were: Nevada (-8.8 percent), Arizona (-4.9 percent), Minnesota (-4.7 percent), Idaho (-4.1 percent) and Georgia (-3.6 percent).

-Including distressed transactions, the peak-to-current change in the national HPI (from April 2006 to November 2011) was -32.8 percent.

-Excluding distressed transactions, the peak-to-current change in the HPI for the same period was -23.1 percent.

-Of the top 100 Core Based Statistical Areas (CBSAs) measured by population, 77 are showing year-over-year declines in November, three fewer than in October.

“With one month of data left to report, it appears that the healthy, non-distressed market will be very modestly down in 2011. Distressed sales continue to put downward pressure on prices, and is a factor that must be addressed in 2012 for a housing recovery to become a reality,” said Mark Fleming, chief economist for CoreLogic.

*October data was revised. Revisions with public records data are standard, and to ensure accuracy, CoreLogic incorporates the newly released public data to provide updated results.

CoreLogic HPI monthly updates offer the quickest HPI collateral valuation information in the industry—complete HPI datasets five weeks after month’s end—and leverage the full authority of CoreLogic’s industry-leading real estate databases, covering 6,638 Zip codes, 608 Core Based Statistical Areas (CBSAs), and 1,154 counties in all 50 states and the District of Columbia.
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Reference:
-Full CoreLogic Nov report
-Most recent Case Shiller prices
-All recent home price reports

Below I recap last week’s housing and jobs data, and preview the rate and stock week ahead. Scroll to ‘Bottom Line’ if you’re in a New Year rush. And I offer humble thanks to all my WeeklyBasis readers as I kick off year nine of this report.

RECAP DECEMBER 26-30 MARKET WEEK

Home Prices Down Again: Last week, Case Shiller reported prices of existing single family homes across 20 major U.S. metro areas fell 1.2% in October and fell 3.4% since October 2010. This is the second straight declining month following a five-month ’20-City’ streak of modest rises. This followed FHFA’s report on 12/22 showing the same trend for homes with Fannie/Freddie loans: October was -0.2% month/month and -2.8% year/year. CoreLogic and Zillow November home price reports come out in the next two weeks–their October reports confirmed the down trend.

Blowout Pending Home Sales. But Beware: New purchase contracts to buy existing homes were up 7.3% in November and up 5.9% since November 2010. At 100.1, this NAR pending home sales index was the highest in 19 months. April 2010 was last time index was higher (111.5) as buyers rushed in to get federal homebuyer tax credits. This report was strong but remember: 33% of realtors reported cancelled deals on existing home sales October and November, and this pending home sales report is a leading indicator of existing home sales expected to close in 60 days.

Improving Jobs Data: Claims for unemployment insurance were up for the week but down for the month. Jobless claims were 381,000 for week ended December 24, up 15,000 from previous week, and the 4-week moving average was 375,000, down 5,750. Average claims since 2000 are 390k, so even with the weekly rise, the 1-week and 4-week numbers are still better than long-term trend. But this number doesn’t capture newly hired people or new jobs created. That data is in this Friday’s jobs report, previewed below.

PREVIEW JANUARY 3-6 MARKET WEEK

Next week’s economic calendar is all about jobs, but also has important manufacturing and chain store sales data. Below are noteworthy reports with rate impacts.

ISM Manufacturing: Tuesday is the Institute for Supply Management’s December manufacturing report, which was 52.7 in November, with 50 as dividing line between between expansion and contraction. Good news: November was the 28th month of growth and a 5 month high. Bad news: growth has been slim. December estimates call for 53.4. Also ISM’s December non-manufacturing index that measures services industries is due Thursday. Estimates call for 53, a slight increase over last month’s 52 which was the lowest since January 2010′s reading of 50.7. Rates won’t swing big on these reports unless there’s an unlikely surprise.

ADP Jobs Report: Thursday is payroll provider ADP’s December jobs report. In November, ADP showed 206,000 jobs created, and December estimates call for 200,00. This is a precursor for Friday’s main event: the BLS jobs report. If it exceeds expectations, rates will rise.

Jobless Claims Trend: Last week’s jobless claims rose as recapped above. Thursday’s report will be closely watched to see if the rise sticks or not. Rates even as markets hold for Friday.

Holiday Retail Sales: The ICSC-Goldman Sachs and Redbook Research chain store sales numbers released each week give a more frequent retail sales read than the Commerce Department’s monthly retail sales report. That doesn’t come until 1/12, but we’ll see Wednesday if ICSC-Goldman and Redbook numbers for 12/31 can continue the positive holiday shopping trend they showed last week: ICSC +4.5 and Redbook +4.3, both year-over-year figures for week ended 12/24. Minimal rate impact short-term.

The Week’s Main Event–BLS Jobs Report: Estimates call for the Bureau of Labor Statistics December jobs report to show 150-165k new non-farm jobs created vs. the 120k created in November, and for unemployment to rise from 8.6% to 8.7%. There are two different datasets for jobs gained/lost and unemployment, so this report is usually a wildcard as markets sort through it. We’d have to be on the upside of expectations for rates to rise. I cover this and all data daily, so stay tuned.

Stock & Bond Technicals: Looking at stocks, the S&P 500 closed at at 1258, down .55% on the week, ending right near its 200-day moving average of 1259, and ending 2011 exactly even. As for the first week of 2012, Bespoke says that, since 1928, the S&P 500 has averaged a .61% gain to start the year with positive returns 65% of the time. As for mortgage bonds (MBS), the 3.5% Fannie Mae coupon—a key benchmark lenders use to price consumer rates—rose 85 basis points on the week to close at 102.83. Normally a rise like this would cause a nice rate drop, but lenders held the line a second week since MBS moves were on very low volume. MBS are now a comfortable 60 basis points above their 25-day moving average after closing below it Friday, December 23.

Bottom Line: Last week, I said “rates should be even to up slightly as the 25-day average on MBS is tested.” As noted above, MBS rallied to close well above that 25-day average mark. However, rates stayed even despite the rally because volume was light and lenders were conservative about adjusting rate sheets until normal volume returns to provide more reliable signals. I expect rates to remain even to up .125% next week as MBS stick to their multiweek pattern of holding at the 50-day moving average even if stocks rally.

Even his 20 “city” numbers aren’t based on cities, they’re based on broad geographical regions. Using my own area as an example, the San Francisco “city” component of his index is not the city of San Francisco, it’s a five-county Bay Area region across which there are radical price differences.

This is just one of many facets of Case Shiller’s methodology that makes it less credible for local decision making.

Homebuyers and sellers can’t make relevant decisions using only this data.

They have to make decisions by studying local MLS data for recently sold comparable units with their realtor. And they have to see each property to analyze condition/environmental factors that even MLS data can’t communicate.

All that said, it’s still interesting to hear Shiller’s marco view, so here are a couple notes from listening live. And below that is the full Bloomberg video.

Most notable is his last point: advice to young people on whether to buy a home.

Robert Shiller on Home Prices (paraphrased):
Is housing stabilizing?: Numbers better but still low. Hope would be that people see optimism, and they start an upward spiral. It’s early, but it might start happening.

On consumer confidence: The recent upturn is a positive sign. But if you look at consumer confidence, it’s always up and down, and it’s been down for a decade. Is recent upturn a blip or a serious turning point? These data don’t confirm a serious turning point yet.

Do you see a changing trend: During housing bust, all 20 Cities in the index dropped together. In October, 19 of 20 cities still dropped. “That’s not extreme diversity”, it’s actually more of the same.

Is broader economy recovering?: The outlook for government is especially strong when the economy is weak.

How is the state of finance: I’m bullish on finance for the long run. Finance is a central technology. The U.S. is very good at this technology. It’s still a good time to go into finance if you’re in for the long run.

Do you tell your students to buy a house?: Depends on circumstances. But if you’re staying where you are for 10-15 years, then it’s a good time to buy. Rates are harder to predict than home prices, and rates are incredibly low now. You can lock in rates for 15 years to 30 years, that’s interesting.

Housing market data has been interesting of late. Last week, NAR admitted that the past 5 years of Existing Home Sales were inflated, making the most recent data better than the previous data only because the previous data was revised down. There was a modest rise in Housing Starts last month but if today’s data is accurate it was at the expense of prices. Only when the inventory and shadow inventory of foreclosures is cleared will the housing market start making sense on a national level. On a local level, opportunities always exist.

Consumer Confidence
Consumer Confidence 64.5, previous was 56.0, consensus was 59.0. Much of this is attitude regarding the jobs market. With the Unemployment Rate declining but the Labor Participation Rate also declining the view of the jobs market may not be fact-based.

Richmond Fed Manufacturing Index
-Level was +3, previous was flat, consensus was +5

Dallas Fed Manufacturing Survey
-Business Activity Index -3.0. Previous was 3.2, consensus was 5.0.