Major Real Estate & Investor Sentiment Updates | (11.29.22)
"We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful." - Warren Buffet
What You Need To Know Today:
• We received updated figures from the S&P CoreLogic Case-Shiller 20-City Composite Home Price Index, which is a leading indicator of the housing market's health as it measures changes in sale prices across 20 major U.S. metropolitan areas (list of cities in the footnote).1 Today's updated reading came it at 10.4% which is below the pre-report market expectation of ~10.8% and also down ~2.7% from the previous reading of 13.1%. This is a clear indication/confirmation that the real estate market is rapidly slowing down. Keep in mind, this index is tracking data year-over-year.
• The latest consumer confidence survey from "The Conference Board (CB)" was also released this morning coming in at a reading of 100.2 just slightly above the pre-release forecast of 100.0. This data is collected by surveying approximately 3,000 households regarding the current and future economic conditions. It is important because financial confidence is a leading indicator of factors like consumer spending (including major purchases such as real estate) and can help us project what overall economic activity might look like going forward. A reading a bit higher than expected might indicate faintly more consumer spending than projected… it is the holiday season after all.
• Last but certainly not least, the Federal Housing Finance Agency (FHFA) released the latest month-over-month update for the House Price Index (HPI). This reading came in up 0.1% significantly beating the market expectation of (-1.2%) and the previous M/M figure of (-0.7%). These numbers track the change in purchase prices of homes with mortgages backed by Fannie Mae and Freddie Mac. At first glance, this might seems confusing because the Case-Schiller Index data above looks conflicting, however, keep in mind that the FHFA HPI is measuring month-over-month whereas the Case-Schiller is reporting year-over-year.
Chart Of The Day:
I find the graph below to be highly interesting because it provides an illustration of long-term investor sentiment and how wildly it swings relative to the long-term performance of U.S. stocks. Generally, sentiment is a leading indicator of what will come next. This is because, despite the math, it is still people who dictate markets (see the GME short squeeze in early 2021). One specifically interesting aspect of this graph to note is that investor bullishness went from among with most bullish readings ever in 2021 to the literal least bullish reading on record in 2022 — talk about a sentiment change!
Long-Term Investor Sentiment vs S&P 500 Index Performance Since 19882
The S&P CoreLogic Case-Shiller 20-City Composite Home Price Index measures changes in residential home sale prices in 20 major United States metropolitan areas including Atlanta, Boston, Charlotte, Chicago, Cleveland, Dallas, Denver, Detroit, Las Vegas, Los Angeles, Miami, Minneapolis, New York, Phoenix, Portland, San Diego, San Francisco, Seattle, Tampa, and Washington D.C.
Source: Combined data from the AAII & Investors Intelligence surveys. Data also includes a 12-month smoothing for illustrative purposes.