Consumer Confidence, Case-Shiller Index

Each day the Research staff takes a look at recently released economic indicators, addressing what these indicators mean for REALTORS® and their clients. Today’s update discusses consumer confidence and Case-Shiller home price data.

• Consumer confidence rebounded to the highest mark in 12 months.  Job gains and the stock market boom are no doubt contributing to the improved confidence.
• The latest index figures of 70.8 are essentially the highest in 4 years, other than the 72.0 reading in February of last year.
• Consumer confidence recovery will be important to the Presidential election.  Past experience suggests the incumbent party can expect to win rather easily if the index is 100 or above by election time.  (The one exception to this being when George Bush defeated Al Gore in electoral-college vote, though not in popular vote.)  An index reading of 80 to 90 is likely to result in a very close election.  The consumer confidence recovery is moving in the right direction, but is there enough time to bring up to levels closer to 90 or 100?
• In separate news, durable goods orders declined measurably in January after robust gains in November and December of last year.  There was a tax incentive last year (a faster depreciation allowance) to purchase equipment and companies were hurrying to meet the calendar year deadline.
• The weaker durable goods orders imply a soft GDP growth for the first quarter.  The data will be released in late March, and it is likely to show about 1.5% to 2.0% GDP growth.
• Finally, Case-Shiller home price data for 20 markets was reported, which showed a decline of 0.5 percent over a month period and by 4.0 percent from one year ago.  It is good data in terms of the formula that goes into it.  However, it is unfortunately looking in the rear view mirror.  The latest data is a 3-month moving average of October, November and December of last year.  We are a day away from March.
• One should note that after the cataclysmic price declines from 2006 to 2008, home values have mostly moved sideways.  That is why homebuyers from 2009 to today have exceptionally low mortgage default rates and are some of the most successful generations of homeowners.