The key event of the week was Fed Chairman Ben Bernanke's speech on Friday at the Jackson Hole Economic Symposium. Here was my take on the speech: Analysis: Bernanke Clears the way for QE3 in September and a couple more views: Two more reviews of Bernanke's Speech: Weak Labor Market "a grave concern"
The economic data was still weak, but a little better than expected - since expectations are so low. Q2 GDP was revised up to a still weak 1.7% from 1.5% and personal income and spending increased in July. An important positive was that the Case-Shiller house price index turned positive on a year-over-year basis suggesting house prices might have bottomed earlier this year.
On the other hand, the manufacturing surveys were once again disappointing.
Even the 'better' news was pretty weak ' definitely not 'substantial and sustainable strengthening in the pace of the economic recovery'. Next week the focus will be on the August employment report and the European ECB meeting.
Here is a summary of last week in graphs:
' Case-Shiller: House Prices increased 0.5% year-over-year in June
Click on graph for larger image.
The first graph shows the nominal seasonally adjusted Composite 10 and Composite 20 indices (the Composite 20 was started in January 2000).
The Composite 10 index is off 32.0% from the peak, and up 1.0% in June (SA). The Composite 10 is up 3.5% from the post bubble low set in March (SA).
The Composite 20 index is off 31.6% from the peak, and up 0.9% (SA) in June. The Composite 20 is up 3.6% from the post-bubble low set in March (SA).
The second graph shows the Year over year change in both indices.
The Composite 10 SA is up 0.1% compared to June 2011.
The Composite 20 SA is up 0.5% compared to June 2011. This was the first year-over-year since 2010 (when the tax credit boosted prices temporarily).
' Real House Prices, Price-to-Rent Ratio
Here is another update to a few graphs: Case-Shiller, CoreLogic and others report nominal house prices, and it is also useful to look at house prices in real terms (adjusted for inflation) and as a price-to-rent ratio. Real prices, and the price-to-rent ratio, are back to late 1999 to 2000 levels depending on the index.
This graph shows the quarterly Case-Shiller National Index SA (through Q2 2012), and the monthly Case-Shiller Composite 20 SA and CoreLogic House Price Indexes (through June) in nominal terms as reported.
In nominal terms, the Case-Shiller National index (SA) is back to Q1 2003 levels (and also back up to Q4 2010), and the Case-Shiller Composite 20 Index (SA) is back to July 2003 levels, and the CoreLogic index (NSA) is back to November 2003.
The second graph shows the same three indexes in real terms (adjusted for inflation using CPI less Shelter). Note: some people use other inflation measures to adjust for real prices.
In real terms, the National index is back to mid-1999 levels, the Composite 20 index is back to June 2000, and the CoreLogic index back to October 2000.
As we've discussed before, in real terms, all of the appreciation early in the last decade is still gone.
Here is a graph using the Case-Shiller National, Composite 20 and CoreLogic House Price Indexes compared to owners equivalent rent.
This graph shows the price to rent ratio (January 1998 = 1.0).
On a price-to-rent basis, the Case-Shiller National index is back to Q3 1999 levels, the Composite 20 index is back to June 2000 levels, and the CoreLogic index is back to August 2000.
In real terms - and as a price-to-rent ratio - prices are mostly back to late 1990s or early 2000 levels.
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