Daily Forecast Update: Case/Shiller Price, FHFA, and Consumer Confidence Indices

January 26, 2010

By Selma Lewis, Research Economist

Some good news, some bad news: Although measuring prices from third quarter of last year, today's S&P Case-Shiller home price index was in line with expectations. It did show a slight dip in prices from the previous month and a decline from the year before.
However, prices are up in 70 percent of the markets covered by the index from the month prior, particularly in Phoenix which has been flooded by foreclosures. Los Angeles, San Diego and San Francisco have also seen prices increase, and for at least six consecutive months. Annual figures show that Dallas, Denver, San Diego and San Francisco have shown price increases from a year ago.
Good News: the FHFA House Price Index, which covers purchase prices of houses backing mortgages that have been sold to or guaranteed by Fannie Mae or Freddie Mac, increased in November, 0.7 percent from the month prior, and 0.5 percent from the 12 month prior.
Good news: The Consumer Confidence Index for January showed some shy indication of optimism about the current economic climate. The Index this month rose to a 16-month high as consumers were a bit more positive and a bit less negative. The index is still well below the levels seen before 2008.

The S&P Case-Shiller home price index for 20 metropolitan areas declined a non-seasonally adjusted 5.3 percent compared to a year ago, to 146.28, and up 0.2 percent from the previous month. This was in line with economists' expectations. On a seasonally adjusted basis, the index continued an upward trend of 0.2 percent from the prior month, after a 0.3 percent rise in October.
Also, the home price index for 10 metropolitan areas declined a non-seasonally adjusted 4.5 percent since a year ago, and similarly 0.2 percent from the previous month. On an adjusted basis, 10-city index was unchanged from the previous month.
Compared to October, November prices were up in 14 of the 20 areas covered by the index on a seasonally adjusted basis. The largest month-to-month increased was seen in Phoenix, 1.6 percent, followed by San Francisco. In contrast, New York and Chicago were hit with the biggest drop, about 1 percent each.
It is important to keep in mind that the S&P/Case-Shiller Price Index is a 3-month rolling average of prices between September and November and published with a two month lag.

In today's release of the Federal Housing Finance Agency's monthly House Price Index, U.S. house prices rose 0.7 percent on a seasonally adjusted basis from October to November. On a year over year basis, November's figure shows U.S. house prices rose 0.5 percent. The U.S. index is currently. 10.3 percent below its April 2007 peak.
Regionally, seasonally adjusted monthly price changes from October to November ranged from -0.4 percent in the East South Central Division to + 2.3 percent in the Pacific Division.
The FHFA monthly index is calculated using purchase prices of houses backing mortgages that have been sold to or guaranteed by Fannie Mae or Freddie Mac.

The latest figure by the Conference Board shows the Consumer Confidence Index again improved in January, following increase in December and November. The index is currently at 55.9 from 53.6 in December. The larger increase was seen in the present situation Index which increased by almost 5 points, where as the expectations index increased 0.6 points.
The confidence about the current labor markets improved some. Those stating jobs are "hard to get" decreased to 47.4 percent from December's 48.1 percent, while those believing jobs are "plentiful" increased to 4.3 percent, from 3.1 percent.
In terms of employment, the short term outlook is mixed. The percentage of consumers anticipating more jobs in the following months decreased to 15.5 percent from 16.4 percent in December, while those expecting fewer jobs decreased to 18.9 percent from 20.6 percent. Those expecting the same number of jobs in the next six months increased to 65.6 percent from 63.0 percent in December. Those expecting a decrease in their incomes declined to 16.2 percent from 18.4 percent.