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 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 monthly growth of 0.6% and 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.

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. 

Only 2 cities are further below their peaks. Las Vegas, which was previously, the hottest market, saw its growth rate fall from 3.3% to 2.9%. That’s while its comp fell from 13.8% to 13.4%. The hottest and the coolest cities are both in the West as San Francisco has its prices fall 0.7%. At least it had a tough comp (9.9%).

Pending Home Sales

Sticking with the housing market, the October pending home sales index fell from 108.7 to 106.7 which is a 1.7% decline. Even so, its yearly growth was 4.4% because the comp was easy. The comp will get even easier in November and December. 

While this yearly growth isn’t that impressive because of the easy comp, the index is near the high end of this cycle’s range. This wasn’t a bad report. West was interesting because it had the lowest index, but the highest growth rate. It increased 7.5% yearly to 91.9. South is the biggest housing market, so I like focusing on it. Its index increased 5.1% to 125.3.

Relatively Weak Consumer Confidence

In the week of November 23rd, which was the week before Black Friday, Redbook yearly same store sales growth was 4.3% which was up from 4.1%. This is the 2nd weakest reading out of the past 5. There must have been significant seasonal adjustments to compare it to last year which had Black Friday a week earlier.

In the week of November 23rd, jobless claims fell from 228,000 to 213,000. This reverses the slight uptick in the previous 2 weeks. Because of those heightened readings, the 4 week moving average only fell from 221,250 to 219,750. Even with that small decline, the yearly growth rate fell from 0.2% to -2.1%. 

Usually, positive yearly growth is considered a problem. But that hasn’t been the case this year because claims are so low. They have little room to fall further. Yearly growth has been positive 17 times in 2019.

Now, I consider the November preliminary Conference Board consumer confidence report to be weak even though the index only fell slightly. That’s because it did the opposite of the University of Michigan index which has recovered in the past 2 months. 

After dropping about 10 points, the Conference Board index fell from 126.1 to 125.5 in the first half of November. This was the 4th straight decline as you can see from the chart below. It's the longest string of losses since June 2012.

Like the University of Michigan index, the present index fell and the expectations index rose. Specifically, the Present Situation index fell from 173.5 to 166.9 and the Expectations index rose from 94.5 to 97.9. The consumer’s perception of current business conditions weakened. Those calling current conditions good for firms rose from 39.7% to 40.2%. And those calling conditions bad increased from 11% to 13.8%. Net percentage fell 2.3%.

The consumer’s opinion of the current labor market got worse, but expectations improved. Those saying jobs are plentiful fell from 47.7% to 44.8% and those saying jobs are hard to get rose from 11.6% to 12.7%. That’s a net decline of 4%. 

Those expecting more jobs fell from 16.9% to 15.7% and those expecting fewer jobs fell from 18% to 13.2%. Net percentage went from -1.1% to +2.5%. There was barley any change in expectations for business conditions. Finally, the net percentage expecting an improvement in incomes in the short term rose 1.1%.


Housing market is improving as yearly price growth is bottoming. Pending home sales index was solid, and purchase applications growth was good. 

Redbook same store sales growth was weak. But jobless claims were very low. Conference Board survey of consumer confidence wasn’t as inspiring as the University of Michigan report. 

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