Case-Shiller and Consumer Confidence Fall Short
Both the Case-Shiller and Consumer Confidence indices indicated results lower than anticipated.
The Case-Shiller Home Price Index for November revealed that during the 12 months ending in November of 2012 home prices increased by 5.5 percent for the survey’s 20-City Composite. The result fell just a tad short of economists’ 
expectations for a 5.8 percent increase.
The report includes two composite indices: a 10-City Composite and a 20-City Composite. It also includes prices for each of the 20 cities.
From the report:
Data through November 2012, released today by S&P Dow Jones Indices for its S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, showed home prices rose 4.5% for the 10-City Composite and 5.5% for the 20-City Composite in the 12 months ending in November 2012.
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“The November monthly figures were stronger than October, with 10 cities seeing rising prices versus seven the month before.” says David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices. “Phoenix and San Francisco were both up 1.4% in November followed by Minneapolis up 1.0%. On the down side, Chicago was again amongst the weakest with a drop of 1.3% for November.
“Winter is usually a weak period for housing which explains why we now see about half the cities with falling month-to-month prices compared to 20 out of 20 seeing rising prices last summer. The better annual price changes also point to seasonal weakness rather than a reversal in the housing market. Further evidence that the weakness is seasonal is seen in the seasonally adjusted figures: only New York saw prices fall on a seasonally adjusted basis while Cleveland was flat.
The Conference Board’s Consumer Confidence Index for January fell far short of expectations. Although economists had been anticipating that the index would remain unchanged from December’s reading of 66.7, the index sank to 58.6. This is one of those unusual economic reports which is actually based on people’s feelings. Consumer Confidence Takes a Stunning Plunge
From the report:
The Conference Board Consumer Confidence Index®, which had declined in December, fell further in January. The Index now stands at 58.6 (1985=100), down from 66.7 in December. The Expectations Index declined to 59.5 from 68.1. The Present Situation Index decreased to 57.3 from 64.6 last month.
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Says Lynn Franco, Director of Economic Indicators at The Conference Board : “Consumer Confidence posted another sharp decline in January, erasing all of the gains made through 2012. Consumers are more pessimistic about the economic outlook and, in particular, their financial situation. The increase in the payroll tax has undoubtedly dampened consumers’ spirits and it may take a while for confidence to rebound and consumers to recover from their initial paycheck shock.”
Consumers’ appraisal of current conditions deteriorated in January. Those claiming business conditions are “good” declined to 16.7 percent from 17.2 percent, while those stating business conditions are “bad” increased to 27.4 percent from 26.3 percent. Consumers’ assessment of the labor market has also grown more negative. Those saying jobs are “plentiful” declined to 8.6 percent from 10.8 percent, while those claiming jobs are “hard to get” increased to 37.7 percent from 36.1 percent.
Consumers’ optimism about the short-term outlook continued to deteriorate in January. Those expecting business conditions to improve over the next six months declined to 15.4 percent from 18.1 percent. However, those expecting business conditions to worsen declined slightly to 20.6 percent from 21.1 percent.
The major ETFs expected to respond to the Case-Shiller Home Price Index and the January Consumer Confidence Index are:
iShares Dow Jones U.S. Real Estate ETF (NYSEARCA:IYR) +0.18% Learn More About iShares ETFs
iShares Dow Jones Home Construction ETF (NYSEARCA:ITB) +0.38%
Vanguard REIT ETF (NYSEARCA:VNQ) +0.29%
Consumer Discretionary Select Sector SPDR ETF (NYSEARCA:XLY) -0.39%
SPDR S&P Retail ETF (NYSEARCA:XRT) +0.13%
The 2013 Economic Reality Check
Bottom line: Housing prices made a solid advance during the 12-month period ending in November of 2012, despite the fact that the Case-Shiller 20-City Composite fell 30 basis points short of economists’ expectations. Although the Consumer Confidence Index made a more significant decline, it will be interesting to watch for any improvement if and when the debt ceiling and sequester matters are resolved.
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