Case-Shiller Index (Home Prices), July

TRADEX GLOBAL INTERNAL COMMENTARY

The Case-Shiller Index increased 0.5% from June 2011.  This is the first year-over-year increase since September 2010!  Prices jumped last quarter greater than any quarter in the last six years.  This is with no spin and no seasonality effect (as it is year-over-year).  I looked at the individual cities and it is pretty evenly spread across the board, with almost every large city posting solid increases.  I have waited for this type of news to confirm our overweight positions in MBS and I/Os.  The Portfolio will certainly benefit from this report, as we have exposure to bonds sensitive to home prices.  It may be just around the corner that higher rates and slowing refinancings will push the I/Os up also. Keep nimble – Michael Beattie

EXTERNAL RESEARCH COMMENTARY

Home prices in 20 U.S. cities climbed in June for the first time since a tax credit boosted sales in 2010, indicating the industry at the heart of the worst recession in the post-World War II era is starting to rebound. The S&P/Case-Shiller index increased 0.5 percent from June 2011 after falling 0.7 percent in the year to May, a report from the group showed today in New York. The last 12-month increase took place in September 2010. Nationally, prices jumped last quarter by the most in more than six years. The lowest mortgage rates on record and a decline in sales of distressed properties may help the market contribute to the economic expansion that is now in its fourth year. A more sustained rebound may require easier lending conditions, which would also give consumers a lift after a report today showed household confidence sank to the lowest level of the year. “Finally, the housing market is forming a bottom,” Mohamed El-Erian, chief executive officer and co-chief investment officer of Pacific Investment Management Co., said on Bloomberg Television’s “In the Loop” with Betty Liu. “That should be welcome. It is not surprising because affordability is so attractive right now.” Stocks were little changed as investors weighed the economic reports ahead of Federal Reserve Chairman Ben S. Bernanke’s speech on the economy in three days. The Standard & Poor’s 500 Index fell less than 0.1 percent to 1,409.76 at 1:55 p.m. in New York. Overseas, housing markets aren’t faring as well. Sales of newly built homes in Australia dropped in July to the second- lowest level on record, a report today showed.

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