Consumer Confidence Falls Right Before Holiday Shopping Season

House Price Growth Might Be Bottoming

In the MBA report from the week of November 22nd, the seasonally adjusted purchase applications index was down 1% on a weekly basis after it increased by 7%. On a yearly basis, it was up 55% because last year, this week included Thanksgiving and this time it didn’t. It’s not a fair comparison. Even so, buyers are showing interest in purchasing homes even though consumers say prices are unaffordable.

It appears home prices are bottoming based on the recent FHFA and Case Shiller price indexes. Sales have increased and inventory has tightened this year. It’s only natural for price growth to stop falling. Plus, price growth is facing easier comps each subsequent month. 

Case Shiller 2 year growth stack actually fell. It’s important for price growth to be solid. That will drive construction growth which helps real residential investment growth. Higher price growth means more profits for home builders. We need to see improved construction spending and housing starts up to help GDP, not home sales. We follow sales because they lead to more construction.

Specifically, the FHFA home price index had a monthly growth of 0.6% and a yearly growth of 5.1% in September. Those beat August’s readings of 0.2% and 4.6%. Obviously, the growth rate is higher in the FHFA index. But the Case Shiller national price index showed similar results on a rate of change basis. 

Growth increased from 3.1% to 3.2% in September. I wouldn’t be surprised if growth in October and November increased as well given the solid Housing Market Index reports. 2-year Case Shiller growth stack fell. The comp went from 5.7% to 5.4%. With comps getting much easier in the next few months, it will be difficult for growth to fall at all especially with rates this low.

(Click on image to enlarge)

The chart above breaks down the results by city. As has been the case for the past few months, big cities have seen lower growth than the national average. 20 city average growth rate was 2.1%. Once again Phoenix had the highest growth rate, but its rate actually fell from 6.3% to 6%. Even though Phoenix has been the hottest market for the past few months, its price index is still 14.2% below its record high. 

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