US Macro Updates

Key takeaway: Even though interest rates have had a stratospheric rise in the past 18-24 months, US Residential House Prices have not fallen – in fact they have risen. In 2022, as the Fed embarked on the fastest and largest tightening program ever since Paul Volcker’s days, the fear and consensus expectation was for the housing market to crash. However, this has been the shortest housing downturn in the history of the US. The S&P / Case Shiller House Price Index peaked in June 2022 and then started falling as the initial interest rate hikes started to take effect. However, in an unusual turn of events, as rates increased further, more home owners started to experience the “rate lock” phenomenon and supply of houses fell dramatically. On the other hand, despite higher mortgage rates and lower affordability, resilient demand kept a floor below residential purchases and home prices, which had experienced a mild decline in the second half of 2022, started increasing once again. The latest release of the S&P Case Shiller Price Index showed the National home price NSA Index reported a NSA 0.3% m-o-m gain in September following a 0.4% increase in August, 0.6% increase in July, 0.9% increase in June and a 1.2% the month earlier in May. The Index is now up 3.93% on a y-o-y basis. The last point to note though is that the Case Shiller Index data comes with a significant lag. The September Index is reflective of contracts signed in the months before September. Mortgage rates had increased even further in October and real estate purchase activity is more likely to diminish going forward. Also it is likely that the supply of homes will gradually increase as sellers gets used to this new normal and decide not to delay putting their house on the market any further.

• The S&P/Case Shiller National Index NSA increased 0.3% in Sep 2023

31st Oct 2023

Key takeaway: House prices continue to rise in the US. In 2022, as the Fed embarked on the fastest and largest tightening program ever since Paul Volcker’s days, the fear and consensus expectation was for the housing market to crash. However, this has been the shortest housing downturn in the history of the US. The latest release of the S&P / Case Shiller House Price Index data shows a continuing recovery in house prices which bottomed around mid-2022. Similar to other private measures of the residential real estate sector, the S&P Case Shiller house price indices recorded a positive m-o-m increase for the month of August 2023 (released in October 2023). The National home price NSA Index reported a NSA 0.4% m-o-m gain in August following a 0.6% increase in July, 0.9% increase in June and a 1.2% the month earlier in May. On a SA basis though, the monthly index gain reaccelerated from 0.65% in July to 0.9% in August. Irrespective of the differences due to seasonality, the key point remains that the drop in residential real estate prices that most were expecting same time last year, has not materialized at all. Without going into intricate details, the reason remains resilient new houses demand and shortage of overall supply of houses in the US. On a year on year basis, the National Index is now up 2.6%. The last point to note though is that the Case Shiller Index data comes with a significant lag. The August Index is reflective of contracts signed in the months before August. Mortgage rates have since reached stratospheric levels and real estate purchase activity is more likely to diminish going forward. 

• The S&P/Case Shiller National Index NSA increased 0.4% in Aug 2023

26th Sep 2023

Key takeaway: House prices continue to rise in the US. In 2022, as the Fed embarked on the fastest and largest tightening program ever since Paul Volcker’s days, the fear and consensus expectation was for the housing market to crash. However, this has been the shortest housing downturn in the history of the US. The latest release of the S&P / Case Shiller House Price Index data shows a continuing recovery in house prices which bottomed around mid-2022. Similar to other private measures of the residential real estate sector, the S&P Case Shiller house price indices recorded a positive m-o-m increase for the month of July 2023 (released in September 2023). The National home price NSA Index reported a NSA 0.6% m-o-m gain in July following a 0.9% increase in June and a 1.2% the month earlier in May. The 10-city and 20-city NSA composites posted increases of approximately 0.6% each. There are two key points to understand about the continuous rise in house prices. First, this is lending a lot of strength to the “no recession” camp. Second, the second order effects of this rise in house prices risk an upsurge in CPI, both in the overall spending by consumers and the eventual effect of increasing rents in the US 

• The S&P/Case Shiller National Index NSA increased 0.6% in Jul 2023

29th Aug 2023

Key takeaway: House prices continue to rise in the US. In 2022, as the Fed embarked on the fastest and largest tightening program ever since Paul Volcker’s days, the fear and consensus expectation was for the housing market to crash. However, this has been the shortest housing downturn in the history of the US. The latest release of the S&P / Case Shiller House Price Index data shows a continuing recovery in house prices which bottomed around mid-2022. Similar to other private measures of the residential real estate sector, the S&P Case Shiller house price indices recorded a positive m-o-m increase for the month of June 2023 (released in August 2023). The National home price NSA Index reported a NSA 0.9% m-o-m gain in June following a 1.2% the month earlier in May. The 10-city and 20-city NSA composites posted increases of 0.9% each. On a year on year basis though, the home price index is mostly flat or slightly down (for all three indices). There are two key points to understand about the continuous rise in house prices. First, that this is lending a lot of strength to the “no recession” camp. Second, the second order effects of this rise in house prices risk an upsurge in CPI, both in the overall spending by consumers and the eventual effect of increasing rents in the US. 

• The S&P/Case Shiller National Index NSA increased 0.9% in Jun 2023

25th Jul 2023

Key takeaway: House prices continue to rise in the US. In 2022, as the Fed embarked on the fastest and largest tightening program ever since Paul Volcker’s days, the fear and consensus expectation was for the housing market to crash. However, this has been the shortest housing downturn in the history of the US. The latest release of the S&P / Case Shiller House Price Index data shows a continuing recovery in house prices which bottomed around mid-2022. Similar to other private measures of the residential real estate sector, the S&P Case Shiller house price indices recorded a positive m-o-m increase for the month of May 2023 (released in Jul 2023). The National home price NSA Index reported a NSA 1.2% m-o-m gain in May. The 10-city and 20-city NSA composites posted increases of 1.5% each. There are two key points to understand about the continuous rise in house prices. First, that this is lending a lot of strength to the “no recession” camp. Second, the second order effects of this rise in house prices risk an upsurge in CPI, both in the overall spending by consumers and the eventual effect of increasing rents in the US. 

• The S&P/Case Shiller National Index NSA increased 1.2% in May 2023

27th Jun 2023

Key takeaway: House prices continue to rise in the US. The latest release of the S&P / Case Shiller House Price Index data shows a continuing recovery in house prices which bottomed around mid-2022. Similar to other private measures of the residential real estate sector, the S&P Case Shiller house price indices recorded a positive m-o-m increase for the month of Apr 2023 (released in Jun 2023). The National home price NSA Index reported a NSA 1.3% m-o-m gain in Apr. The 10-city and 20-city NSA composites posted increases of 1.7% and 1.7%. The continuous rise in house prices is lending a lot of strength to the “no recession” camp. 

• The S&P/Case Shiller National Index NSA increased 1.3% in Apr 2023

30th May 2023

Key takeaway: The latest release of the S&P / Case Shiller House Price Index data shows a continuing recovery in house prices. Similar to other private measures of the residential real estate sector, the S&P Case Shiller house price indices recorded a positive m-o-m increase for the month of Mar 2023 (released in May 2023). The National home price NSA Index reported a 1.3% m-o-m gain in Mar. The 10-city and 20-city composites posted increases of 1.6% and 1.5%. After seasonal adjustments, the national index posted 0.4% m-o-m and the 10-city and 20-city indexes posted increases of 0.6% and 0.5% respectively. House prices, as recorded with this Index, had started falling mid 2022. However, the decline is house prices has turned a corner now with 2 continuous months of price increases. The shortage of homes in the existing home sales market together with continued buyer resilience, has put a floor under the house prices declines. Given this and other recent economic indicators, it is not surprising to see the Fed funds futures market price another 25 basis points rate hike at the June meeting!

• The S&P/Case Shiller National Index NSA increased 1.3% in Mar 2023

25th Apr 2023

Key takeaway: Similar to other private measures of the residential real estate sector, the S&P Case Shiller house price indices recorded a positive m-o-m increase for the month of Feb 2023 (released in Apr 2023). Consensus expectations were for the indices to move lower on a m-o-m basis. The National home price NSA Index reported a 0.2% m-o-m gain in Feb. The 10-city and 20-city composites posted increases of 0.3% and 0.2%. After seasonal adjustments, the national index posted 0.2% m-o-m and the 10-city and 20-city indexes posted increases of 0.1%. The moderation of the declining home prices trend is now being uniformly seen across various private indicators. It will be interesting to watch whether the downward trend re-commences in the subsequent months or do home prices stabilize at this level. The level of house prices also have a direct effect on shelter inflation – albeit with a lag.

• The S&P/Case Shiller National Index NSA increased 0.2% in Feb 2023