House Price Boom Continues

Just out:

NEW YORK, APRIL 25, 2017 – S&P Dow Jones Indices today released the latest results for the S&P CoreLogic Case-Shiller Indices, the leading measure of U.S. home prices. Data released today for February 2017 shows that home prices continued their rise across the country over the last 12 months. More than 27 years of history for these data series is available, and can be accessed in full by going to www.homeprice.spdji.com. Additional content on the housing market can also be found on S&P Dow Jones Indices’ housing blog: www.housingviews.com.

YEAR-OVER-YEAR 
The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 5.8% annual gain in February, up from 5.6% last month and setting a 32-month high. The 10-City Composite posted a 5.2% annual increase, up from 5.0% the previous month. The 20-City Composite reported a year-over-year gain of 5.9%, up from 5.7% in January.
Seattle, Portland, and Dallas reported the highest year-over-year gains among the 20 cities. In February, Seattle led the way with a 12.2% year-over-year price increase, followed by Portland with 9.7%. Dallas replaced Denver in the top three with an 8.8% increase. Fifteen cities reported greater price increases in the year ending February 2017 versus the year ending January 2017…

(more after this)

Continuing…

The following chart shows the index levels for the U.S. National, 10-City and 20-City Composite Indices. As of February 2017, average home prices for the MSAs within the 10-City and 20-City Composites are back to their winter 2007 levels.

Spendy, huh?  But prices are not yet back to their 2007-2008 highs in some markets…

Let the Blow-Off Begin!!! (?)

We had a pretty good day in the market yesterday, what with net asset value up over 3%, I’m no fool and I sensed it was time to leave the party.  Market futures have continued up this morning, so we will see.  Cowardice sometimes pays better than bravery while actively trading.

In terms of where we are (very short term), I think it is possible that we are starting a wave V up, we had a little 1 up (we made some dough there), then a 2 down (where we re-entered), then we sold near yesterday’s high, and if we get a pullback later this week, we may re-enter long again.

Our usual way to play such events is a longer-term buy and hold approach, but I’ve been brushing up on my poker skills (*on the Kindle – where there are lots and lots of gambling apps) so it’s as much learning about money management as chance.  But wait until you see how closely we are replaying the early blow-off part of the 1929 period…

(after the ad, of course)

An explanatory note before I put this chart up:  I evolved (over the years) a unique way of looking at the markets as two large, loosely-linked financial “bubble-spheres.”

There is a Global Aggregate we track along with a U.S. Aggregate because the breadth of economic activity in America is hugely different today than it was in the 1920s (Roaring Twenties).

Back then, it was still a world of singular dominant industrialists like Rockefeller, the Steel Barons, the Rail Tycoons, and such.  30 Stocks mattered greatly.  Today?  Not so much.

The data (which we track on a daily basis) still useful from an analytical perspective, but the “slope of the curve” of this blow-off is evolving differently.

I won’t to into too much detail (we save that for the paying customers on the www.Peoplenomics.com side of the house), but this should give you an idea of how things are trending upward:

Where a large portion of judgment needs to be applied is intuiting the reason for the differences here recently in slope of the curve.  If you are into being a quant, you can see the divergences when you do slope-fitting.  If not (like you’re a normal person, right?) you can visually note that the read line (present day) is going up less steeply than it did in 1928-1929.

I have half a dozen leading contenders for this recent variance, although we are still going up and if yesterday is any indication, mania is lurking just behind the eyeballs of “investors” as they come out and reveal themselves as money-grubbing greedsters, which we make no apologies for.

  1. It is possible that the lack of a tax break has kept the blow-off from gathering steam.  Recall the Revenue Act of 1929 included a tax break and that may have contributed to the previous blow-off. Not that the Developer-in-Chief wasn’t pushing for it.  It’s that Congress has become (even more) adept at stewing, not doing.
  2. Second factor is real disposable Income.  As The Tax Foundation noted on Tax Freedom Day (April 23) the American public will pay $5.1- billion in federal, state, and local taxes this year.  In 1929 the bottom rate was 0.38% while the top rate was 24%.   This compares with 2016 bottom rates of 10% and top rates of 39.6% per The Tax Foundation. Notice how corporates can pay at a lower rate than humans and they can write-off the cost of (effectively) buying Congress?
  3. While I have to call to find out, despite Chief Justice Roberts hinting that Obamacare is a tax, whether it was included.  I doubt it, but it ain’t optional and penalties applied.  So seems like a tax to me.
  4. Another massive change that would reduce the slope of the curve is speed of communications.  When I am actively trading (guilty!) I am looking at a trading platform where the data comes in faster than I can cogently think it through.  My Monday sell order placed: 04/24/17 10:46:49 AM EDT was executed 04/24/17 10:46:50 AM EDT.  Compare this with trading in the Roaring Twenties when out in the American hinterlands, there was one quote per day and you had to wait for the evening or next morning paper to get the quote.  Then the quote went through a local broker and were consolidated and sent to the floor traders.  The speed of information is an interesting study:  Slower speeds can result in higher levels of information asymmetry and this causes extensions and exaggerations of (choir, please!) Bubbles!!!
  5. Because of growing volume, the exchange (NYSE) began opening Saturdays (I THINK it was 1928, but I’m too lazy to check the data files).  So this, too, would artificially increase the slope of the curve because there was 20% more trading time per week…so the modern analog would be (pencil?) 16.6% less steep on that (semi-irregular) calendar adjustment alone.

So that’s where we are this morning.  We have gotten past the recent “congestion” of the wave IV and now into a V to finish and then we can worry.

Herbert Hoover took office March 4, 1929 and the blow-off top was 183 calendar days later.  (Crap, I have to look at the data now…) 148 trading days from the Oath to Peak.  Since Trump was sworn on January 20th, you can work it all out.  By the way, Charles Curtis, a republican from Kansas wave Hoover VP – and the first Native American Vice President.  (Cut us in for a slice of your trivia wins.

Will the FedGov Close Friday?

Not entirely moot as the “White House budget chief floats trade on ObamaCare, border wall funding.”

Meantime, look for lumber prices to move up.  This as the NY Times reports “In New Trade Front, Trump Slaps Tariff on Canadian Lumber

Like They Just Showed Up?

Who’s kidding who?  From the Washington Post today: ‘In Chicago, Obama tells young leaders that ‘special interests dominate the debates in Washington.’

Fresh from David Geffen’s super yacht….ahem….  Like the special interests haven’t always been there even during….oh don’t get me started.

The Case for Internet Use Licensing

I have been repeating over and overs that too much communications can be worse than too little.  Here’s my latest proof:

40-60 hooligans swarmed a BART train in East Oakland this week.  Help people up, robbed and beat them and we gone by the time cops arrived in 5-minutes.

Read my lips:  Social (and other internet content) will have to be subjected to licensure or any old flash mob organizer in the world can come along, radicalize and rubberize not to mention victimize the innocent peeps.

Thing about the Communications Act of 1934.  When D2 sets in (there’s still some time to go) we can rest assured the “wild west” days of social will have the clamp put on…along with “unlicensed” mob-organizing messaging s/w.

You just have to see things from the Big Picture perspective.  No, anarchists and disrupters won’t be around for too many more years.  Toss in predictive web behaviors and….

(Advances in video are the focus in Peoplenomics tomorrow, BTW – neat new tech is in view…)

Comments

House Price Boom Continues — 15 Comments

  1. Isn’t this nice.. they do this all the time exempt themselves.. funny thing is the fix is simple.. no price gouging no discrimination and everyone is able to buy the same product at the same price.. if it means it goes up.. so be it.. Oh open the borders.. let companies from outside the usa have an option to compete with usa companies.. same things with pharmaceuticals..

    http://www.msn.com/en-us/news/politics/republicans-exempt-their-own-insurance-from-their-latest-health-care-proposal/ar-BBAnqI1?li=BBnb7Kz&ocid=iehp

    • http://www.cc.com/video-clips/cbbn22/the-daily-show-with-jon-stewart-third-world-health-care—knoxville–tennessee-edition

      this pretty much says it all.. having seen this stuff first hand.. what gets me is people don’t grasp it.. if a clinic refuses to see a third of the patients because they don’t have insurance forcing them to seek the care they need at the Emergency room.. and are not able to pay for the services.. those costs are passed on down to those with the funds and insurances..
      the doctors that rent office space costs have to go up accordingly etc.

      • Single payer universal coverage. Increase FICA to pay for it. Get it off of the shoulders of American businesses. Cut out the multiple layer of insurance gate keeping, denial, executive and stockholder compensation.

        It’s impossible to quantify the benefits that would come about when folks no longer have to worry about getting insurance coverage. All those people working for benefits not having to do that any longer?? Wow!

  2. George, I talked to my daughter in Spokane tonight. She’s been looking for a house for a while now. She said suddenly the market is so hot that houses are selling within 3 days for 20-30K over asking price. She’s now waiting for the crash. We were in the Seattle area in 2008, she remembers.

  3. George, not get why you are so down on Obama. Daily attacking the man (this day, where/how he vacations). Instead of addressing his ideas or accomplishments, such as tripling the stock market and bringing US tax revenues back up to pre-crash levels. Ad hominem attacks. Surprising for (generally) such a data driven person as you. Mike

    • Tripling the stock market? Do you mean inflation? Great accomplishment. US revenues are at record levels, but nothing, nothing compared to the amount of debt he allowed under his administration. Healthcare? I have friends who can’t afford to go to the doctor because their insurance is so damned expensive. His limits on carbon emissions have shut down half the electrical generating power in Michigan. We are going to become like Great Britain where the elderly die of hypothermia in their own homes because they can’t afford to turn on the heat! You should research the results of those clean energy investments. Millions of dollars of solar and wind investments paid into companies with no returns, idle factories, people paid to sit and do nothing for days on end. IMHO Obama has no good ideas or accomplishments.

  4. When this top blows off, the markets will never return in our lifetime. JSMineset.com just posted an explanation of why the so called markets are staying up. Central banks around the world have increased their asset holdings by $1.2 trilllion so far this year, they have been buying stocks and bonds, including a lot of junk. Central bank reserves of this crap are now over $14 trillion, over $4 trillion of that is the Federal Reserve Holding USA treasuries which should be rated as junk. The problem comes when they are forced to sell these reserves. There is no entity large enough to absorb this in the entire world. Central banks are the largest entities. They have printed so much money they are running out of things to buy with it. It’s like being required to spend $100k at Walmart to keep Walmart from going out of business. You would end up with a lot of crap. And that’s exactly what these central banks have on their balance sheets. They are buying the stocks and bonds that no sane person would want to keep the markets up in am attempt to start that rush for the door.

    When the top does blow off, the big boys will already be short. For others attempting to go short, they will simply have no one to take the other side of that short.

    Remember, this growth that we are seeing out there is merely creative bookkeeping to label inflation as growth. Raising prices or reducing package size can make profits go up with the sale of fewer units of product. And stock prices go up when companies borrow money to buy back their own stock. It’s not exceptionally difficult to have a profitable company when the cost of funds is near zero or even negative.

    There is nothing real out there in the financial world. Fundamentals mean nothing. There is no longer any sound money in the world except for metal, and you have to go a long way down the financial food chain to find a business doing honest accounting according to the FASB rules of 30 years ago. And that includes governments.

    Check the Chapwood index to verify this. Inflation for real consumer goods is 8-11% depending on location. Population grows by 3% per year. Any of you out there buying 8% more stuff than you did the year before? Looking at real wages, I would guess most of you are buying less than you did last year.

    • Great insight! “There is no longer any sound money in the world” (except for the metal in citizen’s bullets). The central banks are criminal enterprises run by??? People getting distracted by all sorts of minor issues while being deceived by statistics (even on this site ;) that have lost their meaning.

  5. Just a thought I’ve been batting around in my mind about historical comparisons.

    1920-1921 = 2000-2003
    1929-1932 = 2008-2009
    1937 = now or next year.

    Post 2009, real unemployment was 16-18% early on (per shadow stats), lots of retailers tanked and that trend continues, many small banks went away, tent cities, folks living out of vehicles, everything the great depression had. The reason we don’t see it as obviously as they did in the 1930s is entitlements and cheap basic goods from overseas. That’s kept the lid on. And electronic distractions….perhaps there’s a reason “the stars” are getting more outré in their behavior?

    But 1929 or 1937…..times about up.

    • Interesting thought ~ but I doubt we’re heading for WW-3, because the potential destructive energy is too big to make it profitable. We maybe heading into civil war (like Syria) as soon as a depression will rear its ugly head. As for now, the masses (and I mean masses) are too engrossed with their cell phone apps.