Nominal annual home price declines are rare

The Daily Shot: 08-Sep-22
The United States
Canada
The United Kingdom
The Eurozone
Europe
Asia – Pacific
China
Emerging Markets
Cryptocurrency
Commodities
Energy
Equities
Food for Thought



 

The United States

1. The Fed’s Beige Book provided more evidence that the labor market is starting to loosen.

Employment rose at a modest to moderate pace in most Districts. Overall labor market conditions remained tight, although nearly all Districts highlighted some improvement in labor availability, particularly among manufacturing, construction, and financial services contacts. Moreover, employers noted improved worker retention, on balance. Wages grew across all Districts, although reports of a slower pace of increase and moderating salary expectations were widespread.

Source: Reuters   Read full article  
 
Treasury yields moved off the highs, …
 

 
… but the probability of a 75 bps Fed rate hike this month is back near 80%.
 

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2. Next, we have some updates on the housing market.
 
Mortgage rates remain near 6% (2 charts).
 

 
Source: Mortgage News Daily  
 
Mortgage applications continue to trend lower.
 

 
Here is the rate lock index.
 
Source: AEI Center on Housing Markets and Finance  
 
More real estate agents see home prices declines, …
 
Source: @johnburnsjbrec  
 
… amid deteriorating affordability.
 
Source: Goldman Sachs; @tracyalloway  
 
At the national level, home price appreciation has been slowing, but prices are still well above last year’s levels.
 
Source: AEI Center on Housing Markets and Finance  
 
Source: National Association of REALTORS  
 
Home sales are back below listing prices.
 
Source: Redfin  
 
Total listings have risen, …
 
Source: National Association of REALTORS  
 
… but new listings are slowing (2 charts).
 
Source: National Association of REALTORS  
 
Source: Redfin  
 
Consumers expect home price declines over the next 12 months.
 
Source: @atanzi, @wealth   Read full article  
 
Nominal annual home price declines are rare.
 
Source: MRB Partners  
 
Mortgage debt growth has declined when adjusted for inflation.
 
Source: SOM Macro Strategies  
 
Even if we get a significant decline in home prices, very few homeowners will end up with negative equity.
 
Source: Black Knight  

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3. Auto production is starting to ramp up again.
 
Source: Quill Intelligence  
 
Fresh supplies of vehicles will decrease auto dealers’ margins.
 
Source: Pantheon Macroeconomics  

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4. Restaurant and airline demand is now above pre-COVID levels.
 
Source: Pantheon Macroeconomics  
 
But mall visits are down from the same time last year.
 
Source: Placer.ai  
 
Discretionary spending by the highest income group has been down for three consecutive months.
 
Source: The Bank of America Institute  

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5. Container shipping costs keep sinking amid softer goods demand.
 

 
Trucking companies’ sales are moderating.
 
Source: Evercore ISI Research  


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Canada

1. The BoC continues with aggressive rate hikes, boosting the overnight rate by another 75 bps.
 

 
The market now sees the BoC rate at 3.8% by the end of the year.
 

 
How much will the BoC tighten in total?
 
Source: Wells Fargo Securities  

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2. The BoC balance sheet is expected to keep moving lower.
 
Source: Industrial Alliance Investment Management  
 
3. The trade surplus has been surprising to the upside.
 

 
4. US and Canadian labor force participation rates have been diverging since the start of the century.
 
Source: Industrial Alliance Investment Management  


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The United Kingdom

1. Price caps on energy bills are coming, …
 
Source: BBC   Read full article  
 
… lowering the CPI, …
 
Source: ING  
 
… and massively boosting the costs for the government.
 
Source: ING  
 
The supply of gilts to finance this program will rise substantially.
 
Source: ING  
 
The market is starting to price that new supply in, with the yield curve steepening sharply.
 

 
Here is the spread to Bunds.
 
Source: @WSJ   Read full article  

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2. How high will the BoE’s rate rise?
 
Source: TS Lombard  
 
3. The UK housing market is staring to cool.
 

 
RICS price expectations:
 

 
RICS new buyer enquiries:
 


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The Eurozone

1. Energy price shocks have typically occurred alongside economic contractions.
 
Source: Capital Economics  
 
2. The decline in real wages has been severe.
 
Source: Chart and data provided by Macrobond  
 
3. The ECB has been playing catch-up.
 
Source: Reuters   Read full article  


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Europe

1. Let’s start with Sweden.
 
Private sector output continues to surge.
 

 
Industrial orders are at multi-year highs for this time of the year.
 

 
But consumption is declining.
 

 
Stocks and earnings expectations have been underperforming recently.
 
Source: PGM Global  

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2. Norway’s industrial production is trending higher.
 

 
3. Poland’s central bank slows rate hikes.
 

 
4. Next, we have some data on the Q2 GDP growth in the EU.
 
Source: Eurostat  
 
5. Who is cutting natural gas consumption?
 
Source: @Gavekal  


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Asia – Pacific

1. Japan’s current account unexpectedly swung into deficit.
 

 
2. Taiwan’s exports slowed.
 

 
3. Australia’s trade balance declined sharply from the peak.
 


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China

1. FX reserves continue to fall.
 

 
Reserves are also declining in Hong Kong.
 

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2. The credit and fiscal spending impulse typically leads the business cycle by nine months.
 
Source: BCA Research  
 
3. Household borrowing has declined sharply this year.
 
Source: Simon White, Bloomberg Markets Live Blog  
 
And household leverage has stabilized.
 
Source: @financialtimes   Read full article  


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Emerging Markets

1. Let’s begin with Russia (note that the economic data should be taken with a grain of salt).
 
Industrial production (according to the Federal Service of State Statistics):
 

 
Retail sales (according to the Federal Service of State Statistics):
 

 
The unemployment rate (according to the Federal Service of State Statistics):
 

 
Real wages (according to the Federal Service of State Statistics):
 

 
FX reserves (according to the central bank):
 

 
Car sales:
 

 
Dollar-denominated bond prices:
 
Source: @WSJ   Read full article  
 
Internal documents show Moscow’s concerns about a deep recession.
 
Source: @bpolitics   Read full article  

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2. India’s stock market has been outperforming.
 
Source: @WSJ   Read full article  
 
3. Mexico’s business investment is almost back to pre-COVID levels.
 

 
Vehicle exports strengthened in August.
 

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4. Argentina’s vehicle production hit the highest level since 2013.
 


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Cryptocurrency

1. Ether continues to outperform.
 

 
2. The Ethereum network’s switch to proof-of-stake consensus mechanism is equivalent to turning off power in the Netherlands.
 
Source: The Economist   Read full article  
 
3. The bitcoin dominance ratio (BTC’s market cap relative to the total crypto market cap) continues to fall as altcoins outperform. Will support hold?
 

 
4. This chart shows bitcoin supply holdings by participants of various sizes.
 
Source: @financialtimes   Read full article  
 
5. Almost all of the top 50 altcoins have outperformed bitcoin over the past three months.
 
Source: BlockchainCenter  
 
Over the past month, however, half of the top altcoins have outperformed bitcoin. That reflects a shift from bullish to neutral sentiment.
 
Source: BlockchainCenter  

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6. The crypto Fear & Greed Index is declining deeper into “extreme fear” territory, breaking its uptrend from June.
 
Source: Alternative.me  


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Commodities

1. Wheat prices jumped as Putin plans to disrupt Ukrainian grain exports.
 

 
Source: Reuters   Read full article  

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2. The European emissions contact has been falling.
 

 
3. Retail investors have been buying GLD.
 
Source: Vanda Research  


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Energy

1. NYMEX crude oil futures registered a death cross, adding to downside pressures.
 

 
2. European natural gas futures are down again despite Russia’s decision to halt Nord Stream flows.
 

 
3. This chart shows US federal acres under O&G lease.
 
Source: @WSJ   Read full article  


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Equities

1. The S&P 500 futures held support.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
The Nasdaq 100/S&P 500 ratio is at the lower end of the uptrend channel.
 
Source: Deutsche Bank Research  

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2. Stocks remain sensitive to real yields. Here is the SPY/TIP correlation.
 

 
3. Institutions have been spending a great deal of money on downside protection, which could exacerbate market moves (as dealers dynamically hedge their short-gamma exposure).
 
Source: @sentimentrader  
 
Interestingly, the SPY option skew has been trending lower.
 
  Further reading  

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4. Retail flows into US securities have been declining.
 
Source: Vanda Research  
 
Retail trading activity has slowed sharply.
 
Source: Vanda Research  
 
Retail investor sentiment deteriorated further this week.
 

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5. Dividend yield has been outperforming other equity factors.
 
Source: Jack Ablin, Cresset Wealth Advisors  


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Food for Thought

1. US luxury-auto market boom:
 
Source: @WSJ   Read full article  
 
2. Wages of public school teachers:
 
Source: EPI   Read full article  
 
3. Speaking about your salary with others:
 
Source: MagnifyMoney   Read full article  
 
4. Not back in the office:
 
Source: Statista  
 
5. Product search preferences:
 
Source: @CivicScience  
 
6. Legal status of homosexuality:
 
Source: Statista  
 
7. India’s coal consumption:
 
Source: @robbie_andrew  
 
8. Most valuable sports teams:
 
Source: @OpenAxisHQ  

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