Case-Shiller Home Price Index Climbs
The S&P/Case-Shiller Home Price Index, covering the entire nation, rose 4.2% in the 12 months ended in February, weaker than a 4.4% increase in January. (…)
Both the 10-city and 20-city indexes saw larger year-over-year increases in February than in January. The 10-city index gained 4.8% from a year earlier, up from 4.3% in January. The 20-city index gained 5% year-over-year, compared with a 4.5% increase in January. (…)
Not seasonally adjusted, the 10-city and 20-city indexes saw significant month-over-month increases of 0.5%, their largest increases since July 2014. The U.S. index rose 0.1% over the prior month in February.
Seasonally adjusted, the 10-city and 20-city indexes rose 0.9% and the national index rose 0.4%. (…)
The Homeownership Rate Is Now the Lowest Since 1989, But There’s a Silver Lining
The seasonally adjusted homeownership rate declined to 63.8% in the first quarter of 2015 compared with 65% in the first quarter of 2014, according to estimates published by the Commerce Department on Tuesday.
For the second consecutive quarter, the number of total households–renters and owners–jumped significantly. Because many of those new households are renting, that can drive down the homeownership rate as a percentage of total households, while providing a glimmer of hope in the long term.
The report estimated that renter households increased by more than 1.8 million from the first quarter of 2014, while the number of owner households decreased by 386,000. The quarterly estimates are viewed as not terribly reliable by some economists, but the numbers suggest a step in the right direction.
Economists have been waiting for 20-somethings to emerge from their parents’ basements and begin renting on their own. That is important for the owner-occupied market because, eventually, those renters will likely buy homes. (…)
Another bright spot is that the vacancy rates for both rental apartments and owner-occupied homes was low, economists said. The rental vacancy rate fell to 7.1% in the first quarter of 2015 from 8.3% the year earlier.
The homeowner vacancy fell to 1.9% from 2% in the first quarter of 2014.
After shacking up with family or friends for the past few years, millennials finally seem to be striking out on their own. The number of U.S. households grew by 1.48 million in the first quarter from a year earlier, following a 1.66 million increase in the final three months of 2014, according to data released yesterday by the Census Bureau. While the numbers can be volatile, it marks the fastest back-to-back gains in household formation since the second half of 2005. Separate reports show that the previous weakness in household formation was driven by millennials — young adults born after 1980 — so that group is most likely to be driving the improvement, says Maury Harris, economist at UBS in New York.
The missing ingredient is showing up:
(…) among the five builders reporting last week (representing 18% of U.S. new home sales), aggregate 1Q15 new home orders grew 20.9% y/y. This parallels remarkably close to the 20.6% y/y growth the U.S. Census Bureau reported in its combined January-March data, and it’s tracking better than the 18% y/y new home sales growth we are projecting for all of 2015.
(…) early indications are confirming the first signs of recovery among first-time buyers. As noted above, D.R. Horton’s Express Homes division witnessed a tripling of its y/y orders, while Pulte’s Centex operation saw its highest absorption rate per community since 2008. It remains unclear if there is a precise driver for this entry-level recovery. But, it seems likely that a number of factors are contributing, including more accessible low-down payment financing, steady job growth, lower gasoline prices, and attractive mortgage rates. (Raymond James housing analyst)
Bank of Canada’s Poloz dispels speculation of housing bubble
The Bank of Canada’s top brass assured a parliamentary committee that Canada’s bloated housing market has not become a risky asset bubble, despite the central bank’s own calculation that house prices nationwide are roughly 20 per cent overvalued.
“We don’t believe we’re in a bubble,” Bank of Canada Governor Stephen Poloz said in testimony Tuesday to the House of Commons Standing Committee on Finance. He said Canada’s long-running boom in the housing market hasn’t been underpinned by the kind of rampant speculative buying that is the hallmark of an asset bubble. (…)
Mr. Poloz added that the overvaluation doesn’t necessarily mean the market is in need of a 10-to-30-per-cent downturn to bring it back into balance. He said that rising incomes as the economy gains momentum could help close the affordability gap, without a sharp drop in home values. (…)
Mr. Poloz reiterated that the non-energy segments of the Canadian economy are starting to assert themselves more strongly in the current quarter, as the impact of the oil shock that were felt in the first quarter and the 2014 fourth quarter begin to fade, and the pickup in non-energy export demand gains momentum.
“The segments of non-energy exports that we expected to lead the recovery are doing so, and we expect this trend to be buttressed by stronger U.S. growth and the lower Canadian dollar.”
Specifically, Mr. Poloz noted that key Canadian export sectors tied to U.S. business investment – including machinery and equipment, building materials, metals and aerospace – are showing “very positive growth.” (…)
Euro-Area Bank Lending Increases for First Time Since 2012
Thailand Unexpectedly Cuts Rate After Growth Forecast Cut
The Bank of Thailand lowered its one-day bond repurchase rate by a quarter of a percentage point to 1.5 percent on Wednesday, a move predicted by only two of 20 economists in a Bloomberg survey. The baht slid as much as 0.6 percent, and the benchmark SET index fell as much as 1.2 percent, heading to its lowest close since March 31.
The central bank is using a “strong dose of medicine” because exports may contract, hurting private investment and consumption, which can’t be offset by a rebound in tourism and government spending, Assistant Governor Mathee Supapongse said. The finance ministry earlier lowered its forecast for gross domestic product growth this year to 3.7 percent from an earlier estimate of 3.9 percent.
EARNINGS WATCH
- 251 companies (62.0% of the S&P 500’s market cap) have reported. Earnings are beating by 6.0% while revenues have missed by -0.4%.
- Expectations are for revenue, earnings, and EPS of -3.4%, -1.1%, and +0.6%. Excluding Energy, growth would be 2.2%, 7.1%, and 9.1%
, respectively. This excludes the likelihood of beats.
Saudi Arabia’s King Salman Replaces Crown Prince, Foreign Minister
(…) The cabinet reshuffle also included the appointment of Saudi Aramco Chief ExecutiveKhaled al-Faleh as health minister and chairman of the state oil giant. Mr. Falih joined Saudi Aramco more than three decades ago and has been the president and the chief executive of the company since January 2009. His replacement wasn’t immediately named. The post of Aramco chairman had been held by veteran oil minister Ali al-Naimi. (…)