An Extrapolative Model of House Price Dynamics:
A modest approximation by homebuyers leads house prices to display three features that are present in the data but usually missing from perfectly rational models: momentum at one-year horizons, mean reversion at five-year horizons, and excess longer-term volatility relative to fundamentals. Valuing a house involves forecasting the current and future demand to live in the surrounding area. Buyers forecast using past transaction prices. Approximating buyers do not adjust for the expectations of past buyers, and instead assume that past prices reflect only contemporaneous demand, as with a capitalization rate formula. Consistent with survey evidence, this approximation leads buyers to expect increases in the market value of their homes after recent house price increases, to fail to anticipate the price busts that follow booms, and to be overconfident in their assessments of the housing market.
In February, the unemployment rate decreased in 26 U.S. states, increased in 6 states, and was unchanged in 18 states.
The unemployment rate is higher than a year ago in 4 states: Louisiana (6.7% vs 5.4%), South Carolina (6.6% vs 6.1%), Tennessee (6.6% vs 6.5%), and North Dakota (2.9% vs 2.7%).
Recall that the national jobless rate in February was 5.5%.
Real gross domestic product increased at a seasonally adjusted annual rate of 2.2% in the fourth quarter of 2014, the U.S. BEA published this morning. This was the third estimate for Q4, and the headline figure is essentially unchanged from the prior estimate. The GDP growth rate in Q3 was 5.0% annualized.
Components of GDP by their contributions to GDP growth in Q4:
- Personal consumption expenditures: +2.98%
- Private investment: +0.61%
- Net Exports: -1.03%
- Government Consumption: -0.35%
Nominal GDP was at an annualized $17.7037 trillion in Q4, while real (inflation adjusted, 2009 chained) GDP was $16.2947 trillion.
Real GDP was up 2.4% from Q4 2013.
U.S. initial jobless claims for the week ending March 21 were a seasonally adjusted 282k, down from the prior week’s revised reading of 291k. Not seasonally adjusted, jobless claims for the week were 247k.
Individual states that had changes in claims of more than 1k (not seasonally adjusted):
The 4-week moving average of initial jobless claims was 297k.
The number of unemployment insurance recipients, or continuing claims, for regular state programs was 2.416 million, down from the previous week’s revised reading of 2.422 million.
The insured unemployment rate, which is the number of unemployment insurance recipients as a share of covered employment, was 1.81%, down from 1.82% the week prior.
89.95% of all U.S. jobs are covered by state unemployment insurance programs.
Of the 8.705 million Americans currently unemployed, 27.75% receive unemployment insurance.
Jobless claims and the unemployment rate:
Total distance traveled by vehicles on all U.S. roads and streets were an estimated 237.3 billion miles in January, the Department of Transportation reports. This is a 4.9% increase from the 226.3 billion miles traveled in January 2014.
The rolling 12 month total of vehicle miles driven was 3.049 trillion miles. This is a milestone, as it is the first month that the figure was greater than the prior peak of 3.039 trillion miles driven in November of 2007.
The rolling 12 month total of vehicle miles driven per capita was 12.21 thousand. That is down 7.6% from the June 2005 high of 13.22 thousand miles per capita.
The map from the release shows that, year over year, travel increased in all 5 U.S. regions in January.
The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2% in February on a seasonally adjusted basis, as reported by the U.S. Bureau of Labor Statistics. Over the last 12 months, the all items index has decreased 0.1%.
The core CPI, which excludes food and energy, was up 0.2% in February and is up 1.7% year over year.
The All Food index was up 0.2% in February and is up 3.0% from a year ago. The All Energy index increased 1.0% and is down 18.9% from a year ago.
The Producer Price Index for final demand decreased 0.5% in February, seasonally adjusted. The index for final demand decreased 0.7% for the 12 months ended in February.
The core PPI, which excludes food and energy, decreased 0.5% and is up 1.0% from a year ago.
U.S. new home sales in February were at a seasonally adjusted annual rate of 539k. That is up 7.8% from January’s revised rate of 500k. The national rate of new home sales in February was up 24.8% from a year ago.
New home sales by region, seasonally adjusted annual rate, in February:
- Northeast: 43k from 17k last month.
- Midwest: 54k from 62k last month.
- South: 316k from 287k last month.
- West: 126k from 134k last month.
The median sales price of new houses sold in February was $275.5k, down from $289.4k in January.
The seasonally adjusted estimate of new houses for sale at the end of February was 210k. This represents a supply of 4.7 months at the current sales rate.
New and existing home sales: