Federal Reserve | timiacono.com - Part 4

U.S. Home Price Gains Slow … or Reverse

Standard & Poor’s reported(.pdf) that U.S. home price gains have slowed dramatically in recent months and, on a seasonally adjusted basis, home prices have now declined for the first time in two-and-a-half years as shown below.

As the the non-seasonally adjusted data and the year-over-year data in this report traditionally receive more attention than the adjusted data, few news headlines are indicating (gasp!) U.S. home price declines, but that may soon change.

The 20-City Home Price Index rose 1.1 percent during the month of May, however, this is less than half the increase reported for the same month in 2012 or 2013. As is the case for home sales, seasonality plays a big role in home prices, and after adjustments are made the result is a decline of 0.3 percent in home prices.

On a year-over-year basis, both the raw and adjusted indexes showed a gain of 9.3 percent, however, this is down sharply from an annual gain of almost 14 percent six months prior.

While unadjusted data showed home price gains across the board during one of the strongest month of the year for price gains, some 14 cities in the 20-city index showed declines in adjusted prices, paced by a drop of 0.9 percent in Atlanta and a decline of 0.8 percent in Chicago. In April, the adjusted data showed only five cities with falling prices and, all told, this should serve as another warning sign of a faltering housing market.

Too Low for Too Long?

With U.S. equity markets making new record highs on a weekly (if not daily) basis, there’s been a notable increase in the amount of “bubble talk” recently, said talk normally reaching a crescendo in the days leading up to another Federal Reserve policy meeting.

That’s exactly what’s happening early this week in advance of a gathering of central bank officials as reports like Is the Fed fueling a giant stock market bubble? at USA Today via Motley Fool present graphics like the one below before answering their own question with an emphatic ‘No’. Stock investors are comforted with logic such as “the fact that the Fed’s monetary policies have caused stock prices to soar, doesn’t mean there’s a bubble”.

A more thoughtful take on the subject is offered up by none other than Dallas Federal Reserve President Richard Fisher who notes The Danger of Too Loose, Too Long in the Wall Street Journal that includes the following conclusion:

…with low interest rates and abundant availability of credit in the nondepository market, the bond markets and other markets have spawned an abundance of speculative activity.

There are some who believe that “macroprudential supervision” will safeguard us from financial instability. I am more skeptical. Such supervision entails the vigilant monitoring of capital and liquidity ratios, tighter restrictions on bank practices and subjecting banks to stress tests. All to the good. But whereas the Federal Reserve and banking supervisory authorities used to oversee the majority of the credit system by regulating depository institutions, these institutions now account for no more than 20% of credit markets.

My sense is that ending our large-scale asset purchases this fall will not be enough.

I’ll never forget former Fed Chief Alan Greenspan telling Congress back in 2004-2005 how U.S. banks showed no signs of stress when, meanwhile, the “shadow banking system” was a veritable Wild West in mortgage lending. I’d say the odds are pretty good that the term “macroprudential supervision” will come back to haunt current Fed Chair Janet Yellen.

Warren, Yellen, and Too Big to Fail

It appears they left the best for last yesterday as Sen. Elizabeth Warren (D-MA) closed out day one of Fed Chair Janet Yellen’s semi-annual monetary policy report to Congress with this wholly unsatisfying exchange about too-big-to-fail banks (hat tip Not Quant).

Skip to the 1:34:45 mark of the entire CSPAN video here to find another interesting exchange, this one with Sen. Tom Coburn (R-OK) where Yellen is asked whether it might not be a better idea to just not create so many asset bubbles to begin with.

Well, he didn’t exactly ask it like that…

Tagged with:  

Now that the U.S. team has been eliminated from the World Cup, we ‘Mericans can focus on what we really do best – inflating asset bubbles – and that effort should be bolstered by what is shaping up to be a big number in the nonfarm payrolls data due out from the Labor Department on Thursday, just prior to the nation celebrating its 238th birthday on Friday.

From these two reports at Gallup come the charts below indicating all systems are go.

Of course, it doesn’t hurt that payroll processor ADP reported earlier today that the private sector added 281,000 jobs last month, the biggest job creation total since November 2012.

This should be much more fun than watching soccer…

Tagged with:  
Page 4 of 131« First...23456102030...Last »
© 2010-2011 The Mess That Greenspan Made