THOUGHTS ON TUESDAY’S DATA
The Case/Shiller housing index showed signs of improvement as the index posted its first month over month climb in over two years. Year over year figures are still showing sharp declines with the latest reading at -17.2%. While this is good news it’s likely that seasonal strength in housing is playing a large role. The real test in the housing market will come in the 3rd and 4th quarter when the seasonal buyers are no longer influencing the market quite as much. As for now we appear to be experiencing a fairly standard post bubble price discovery process. My guess is we are pausing in here before prices continue their declines into the end of the year and beginning of 2010.
On the consumer side, we continue to get weak data. Not only was consumer confidence below expectations, but the ICSC same store sales data showed a 0.5% year over year decline and the Redbook data showed another sharp decline of -5.5%.
The market is responding quite negatively to the overall data. The rally is certainly beginning to look tired.
Locally, here in California many foreclosures are being held off the market. Many foreclosed homes simply sit vacant and are not yet for sale. As the number of foreclosures build up and vacant homes finally come on the market, there will be pressure on prices. California set a foreclosure moretorium just as the Federal moretorium was being lifted.
Of 130.8 million housing units in the US 18.7 million of them are vacant. If household formation is about 0.8 million annually, those vacant home provide a lot of potential supply for both rental housing and owner occupied housing.
Well, you can check out skepticism on Calculated Risk about the housing data.
I think this is the story of the day:
http://online.wsj.com/article/BT-CO-20090728-717259.html
Even with the weak auction today the 10yr note (below 3.70%) and the dollar (below 1.42) are still holding on fairly quite well.