CR — Zillow's forecast for Case-Shiller House Price index in February

The composite 10 and 20 indexes declined 3.9% and 3.8% respectively in January, after declining 4.1% in December. Zillow is forecasting a smaller year-over-year decline in February.

Read it at Calculated Risk
Zillow's forecast for Case-Shiller House Price index in February

by Bill McBride

Housing recovery is key to economic recovery. Looks like the bottom may not be in yet, and typically there is V-shaped recovery in housing, especially in a recession due to financial instability and a long financial cycle bottoming. This will likely be a multi-year recovery process once the bottom is in, and another housing boom is likely at least a decade off after the market bottoms and begins to clear. There are still a lot of foreclosures in the pipeline, and many homeowners underwater. This creates a huge drag on the economy, which is exacerbated by a misguided political preference for austerity. Not an encouraging picture.

Data weak...again!

New home sales disappoint today, continuing a string of disappointing data this month that included personal income and spending, ISM manufacturing, mortgage applications, unit labor costs, inventories, current account, industrial production, confidence and housing starts.

The economy is softening due to fiscal drag coming in the form of government spending cuts. So far this year, according to the Treasury's operating statement, total outlays are down $397 bln compared to last year. This equates to a subtraction of 2.5% from GDP, all else being equal. Basically it leaves GDP flat to slightly positive.

Of the main line item expenditures in the Federal budget:

Education spending down 11% bln y-o-y
Defense spending down 5% y-o-y
Unemployment insurance down 22% y-o-y
Medicare down 3% y-o-y
Medicaid down 13% y-o-y
Fed'l salaries down 3.5% y-o-y
Health and human svs down 14% y-o-y

About the only thing up is Social Security (+8.4%) and interest paid on the debt (+9.4%).

Oh yeah, taxes are up y-o-y and that is also contributing to fiscal drag.

Without offsets, this will continue to weigh on the economy and slow it down.

Get the whole picture here in the 2012 Yearly Outlook. The only real MMT based economic forecast for this year.