What a data dump

The August Philly non-manufacturing index flipped back to negative territory at -10.6 vs +7.4 in July. It’s been below zero for 21 of the last 22 months. As the national figure has been consistently positive, I can’t explain the particular weakness in this region relative to the rest of the country. The Beige Book on the Philly region said this a few weeks ago on two key areas of services, “Retailers, both auto and nonauto, reported mostly steady sales. Tourism, which was boosted by mega events in the region, rose moderately.”

The June (thus somewhat dated) S&P Cotality national home price index showed a 1.5% y/o/y price gain after a 1.2% rise in May. The strongest markets are those with the most limited inventory like Chicago, New York, Cleveland, San Francisco, and Boston. Prices fell in Las Vegas, Seattle, Denver, Tampa, Phoenix, Dallas and Portland. Thus, of the top 20 cities where these mentioned are included, the price situation is pretty bifurcated.

Bottom line, while those who own a home don’t want to see a decline in home prices, I think it is needed in order to improve the affordability picture more dramatically for first time buyers that can in turn trigger more transactions. Also of course a continued rise in wages that quicken faster than the rise in prices can help with affordability. As for relying on lower mortgage rates, I unfortunately don’t expect it.

Fyi, this index is now up 53% over the past six years, thus capturing all the monetary easing during Covid and the tightened that followed.

Also out was the July new home sales figure which totaled 607k annualized, 13k less than expected but June was revised up by 50k to 678k. Smoothing out this volatile data set puts the 3 month average at 638k vs the 6 month average of 641k and which compares with the 12 month average of 664k. For perspective, the average in 2019 when mortgage rates were much lower was 685k but with a US population that was about 17 million person smaller.