Home Prices Surge 11.2%: Case-Shiller

Tuesday, March 30, 2021

Market futures are lagging in negative territory a half hour before today’s opening bell, in what continues to be a lackluster trading environment, plateauing up near (or at) historic highs. Of course, big things are expected in the U.S. economy moving forward, and the market loves to trade ahead of them. But for now, even with Consumer Confidence for March expected to jump more than 50 basis points later today, investors are cooling their jets at this hour.

A new Case-Shiller Home Price Index is out this morning, for the first month of 2021, with its strongest year-over-year growth in almost five years: +11.2% easily surpassed the 10.5% consensus estimate and the 10.4% posted for December 2020. This marks the eighth straight month of accelerating home prices, with all 20 cities surveyed in positive territory, and all of them higher for the 12-month period than they were for the previous 12 months.

Leading the way, as it has for more than a year and a half, is Phoenix, at +15.8%. Followed by other high-growth cities Seattle (+14.3%) and San Diego (+14.2%), the trend, though seeming to amp up of late, remains fixed. However, inventories are starting to bottom out at 1.03 million; the demand is still very strong, but homeowners just aren’t putting up their places for sale at the same rate they had, and new construction is being met with high supply costs.

The biggest news this week is expected to be in monthly jobs reports — private sector from ADP ADP Wednesday and overall from the U.S. Bureau of Labor Statistics (BLS) Friday — where expectations are for a big jump in March from February results, with whisper numbers coming in even higher than that. For instance, the current consensus BLS number, at 675K, is 34% higher than the previous month, but some analysts believe a million jobs may have been created in March 2021.

For the ADP private-sector report, last month’s disappointing 117K looks to grow 4 1/2x to 560K. The ADP and BLS jobs numbers don’t often match up in real time, but almost always track along a like trajectory over time. In any case, analysts are preparing market participants for a veritable economic explosion which will be most easily seen in metrics like boffo growth in the labor market.

Two slight dampeners on this employment narrative, however, and neither of them are terrible in the short term: 1) A huge amount of the jobs growth we saw last month was in the Leisure & Hospitality sector; can we rely on one segment of the economy to leap beyond current expectations? Is it really reasonable to expect a million new jobs at hotels and resorts in a single month? and 2) Average Hourly Earnings are not expected to increase much at all, maybe 0.1%. As inflation begins to creep into the economy, these will start to look like even lower-paying jobs than they seemed before.

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