08/30/18 09:07 AM EDT

CHART OF THE DAY: U.S. Home Prices ↓ = Equity Performance ↓?

Christian Drake

Editor's Note: Below is an excerpt from today's Early Look written by Housing analyst Christian Drake. Click here to learn more about the Early Look.

Critical Thresholds …. Critical thresholds are many times only apparent in the rearview. To have hit a critical price-demand-affordability threshold in some of the hot local/regional markets wouldn’t be particularly surprising but it’s difficult to take a convicted view on a month of data. That said, there were some compositional effects apparent in the Case-Shiller data with discrete decelerations in some heavy-weight markets disproportionately impacting the headline ….
The Bigger They Are …. For example, New York carries a 19.4% weighting in the index and registered one of the largest rate-of-change moves in the Index, decelerating -50bps sequentially on a Y/Y basis and slowing a full -200bps in the last 4 months. Similarly, Los Angeles, which carries a 15.1% weighting, has slowed -60bps over the same period. The 2^nd derivative trend in price growth across the 20-cities comprising the Case-Shiller index is plotted in the Chart of the Day below.
HPI ↓ = Equity Performance ↓? ….. Historically, housing related equities tether to the second derivative trend in HPI. A deceleration in price growth would be a headwind for equity performance – particularly if similar dynamics manifest in the New Home market where concerns around margin pressure (lot/labor/regulation/raw materials costs) are already an acute concern.

CHART OF THE DAY: U.S. Home Prices ↓ = Equity Performance ↓?

Cartoon of the Day: Pending...

ICYMI | Hedgeye Investing Summit: Vivek Ramaswamy

TERM OF THE DAY: PUT PREMIUM

CHART OF THE DAY: US Housing Supply Down Bad

Cartoon of the Day: Nudge, Nudge. Wink, Wink.

ICYMI | Hedgeye Investing Summit: Jim Bianco

WEBCAST | Rooms Where It Happened: Lessons from a Life in Government

Cartoon of the Day: Loose Lips Sink Ships

[FREE ACCESS] HedgAI Signals: 4/10/2024 (Long 30yr, HYG)

[FREE ACCESS] HedgAI Signals: 4/9/2024 (Long 30yr, HYG)

Why Inflation Will Remain Higher For Longer

Daniel Lacalle: Why the U.S. Public Debt Is Unsustainable and It Is Destroying The Middle Class

ICYMI | Hedgeye Investing Summit: Josh Crumb and Jeff Currie

Market Situation Report: Manufacturing Sees Persistent Weakness

WEBCAST | Rooms Where It Happened: Lessons from a Life in Government

CHART OF THE DAY: AI Made Simple

Sign up for free: Hedgeye's Market Brief