US home prices fell for a fourth month in a row in July

Case-Shiller home prices fell for a fourth month in a row in July. The 0.1% (MoM, sa) drop left on-year price appreciation at 5% for the country as a whole. The drop is puzzling given that most other housing data - sales, starts, mortgage applications - have perked up significantly this year after a dismal 6 quarter run from 2H13 through 2014. Some regions are, of course, doing better than others - the West and Southwest, for example, are still experiencing price growth of 7%-7.5% YoY. San Francisco and Denver lead the pack with double-digit growth rates. Dallas, Portland and Seattle follow closely behind. LA, San Diego and Las Vegas have fallen into notably middle ground. The Midwest and Northeast trail the nation as a whole - price growth in Minneapolis and Cleveland is down to 3.5% YoY; in New York and Chicago it's fallen below 2%. DC comes in last with home prices up a mere 1.7% YoY in July.

Price growth of 4%-6% is probably what you want in the long-run - roughly the pace of nominal GDP growth. Very much faster or slower than that and you start looking at problems of sustainability. But 15% of home owners today still owe more on their mortgages than their homes can be sold for and the 'negative equity' in the housing sector is one area that continues to hold back the economy more broadly. (Slack in labor markets, investment markets (K:L ratios) and household balance sheets are others). The sooner the slack is taken up in these 4 areas, the sooner the economy starts to function more normally / holistically. Fed hikes seem unlikely to hasten the process. This could explain why the more the Fed insists that a 2015 liftoff remains likely, the lower 10Y Treasury yields go. Yields have fallen by 45 basis points since late-July and now sit at 2.06%. Stay tuned.