Case-Shiller updated is home price data for January this week. Here are the key charts and a discussion of why it’s hard to tell if prices are rising or falling.
Chart Notes
- National and 10-City Case-Shiller home prices hit new record highs in August.
- OER, CPI, and Rent are indexes measured by the Bureau of Labor Statistics (BLS).
- OER stands for Owners’ Equivalent Rent. It’s the price one would pay to rent one’s own house unfurnished and without utilities.
Case-Shiller measures repeat sales of the same home over time and the indexes attempt to weed out major home improvements.
Case-Shiller is a far better measure of home prices than median or average prices which do not factor in the number of rooms, location, lot size, or amenities.
Case-Shiller Home Price Index National and Top 10
Not every city is at record highs although the national and 10-city indexes are.
CS National, Top 10 Metro ,CPI, OER, Primary Rent Percent Change
Year-Over-Year Prices
- Rent of Primary Residence: 6.85%
- OER: 6.69%
- CS 10-City: 6.33%
- CS National: 5.07%
- CPI: 3.14%
Rent inflation is outpacing home price inflation. Case-Shiller data lags as does rent.
I suspect home prices are about to roll over. Nationally, the home price index only rose 0.3 percent, from 491.3 to 493.0. The 10-city index rose 0.2 percent.
New Home Sales Since 1963
On March 25, I noted New Home Sales Little Changed in February
New home sales are about where they were in July of 1963 (blue highlights).
Sales are down 35.7 percent from the August 2020 seasonally-adjusted annualized peak of 1,029.
Consumer Stress is Evident
To entice buyers, home builders are building cheaper and cheaper houses. But what are you getting for your money?
Also on March 25, I reported Consumer Stress is Evident in the Declining Price of New Homes
On reflection, that is a misleading title although the chart is accurate.
One cannot judge from the data whether prices are rising or falling. It is accurate to say median and average new home prices are falling.
I noted the issue in my post.
What Are You Getting?
Price is down but so are room sizes, the number of rooms, lot sizes, amenities, and landscaping.
You are not getting the same house for $400,500 as you did for $496,800. I question the claim that houses are now more affordable.
It’s like saying a bicycle is more affordable than a motorcycle.
In contrast, Case-Shiller is a measure of the same house over time, adjusted for improvements. If the same houses sell for more repeatedly prices are rising.
If the median home has 4 bedrooms six months ago and only 3 bedrooms now, a direct comparison is no longer valid. Room size and yard size is important too, even if the number bedrooms is the same.
Given that Case-Shiller data lags, new home prices may be falling, and I suspect they are, but price alone is not a good way to tell except on the same house.
It depends are where the Real Estate is located. I live in Idaho, Boise area. We are red hot, small, little homes for starter families are 400-500k. This is insanity. Idaho wage is like $20 an hour.
Poor folks, working like a slave and never be able to own anything.
Higher For Longer.
the “Cut Rates Now” brigade have no case.
Case-Shiller is a home inflation index and is showing inflation. We are still suffering massive inflation, no matter what numbers the government cooks up.
Houses are a good the chinese can’t sell half the price, like TVs or cars.Tax evasion is very difficult in real state, the dumbest IRS employee can find a skycraper.
That makes very hard house prices going down.
What ?
link to sparkrental.com
They show 3 maps. The top map is the quarter to quarter price changes by county and the third map is the YoY price changes.
My only quibble with these maps is they use one shade of yellow to show areas of decline without regard to magnitude.
Nevertheless, they tell a story of rising prices in most areas of the country, including California. The only exceptions are Texas, the gulf coast and the Pacific northwest.
Southern California beach town prices are steadily rising but not overheated. Northeast prices are hot with multiple offers common in the Boston area. As long as inflation runs hot, so will home prices.
– A discussion of why it’s hard to tell if prices are rising or falling.
> It is nearly impossible, because we are missing the input data (How & Why). I highly doubt, and for good reason, based on virtually all data I come across, that it’s upgrade or first time buyers. So the How is where is the money coming from? Investors (BR?) for example may be overpaying for rental property ideas moving forward. We will need a lot of that, so somebody must be preparing with money. It’s not the banks, unless it’s a big deal or has to be done deal, as they are too broke to be playing around in RE for the most part. The Why has to do with the purpose. Black rock will overpay perhaps to bring the value of their portfolio up, or maybe to up prices for a coming sale. Maybe strictly for Leverage? Maybe just to hide some money away on some cheap properties in a potential area of growth down the line. Who Knows? Everyone should care though, because it may effect you personally.
– National and 10-City Case-Shiller home prices hit new record highs in August.
> Of course they did, as this is a prime example of Who & Why.
– OER stands for Owners’ Equivalent Rent. It’s the price one would pay to rent one’s own house unfurnished and without utilities.
> Such a moving target, and input data is skewed beyond belief. Toss some darts once a month and you will come close to whatever they tell you.
– Not every city is at record highs although the national and 10-city indexes are.
> See Above
– To entice buyers, home builders are building cheaper and cheaper houses. But what are you getting for your money?
> Cheaper and Cheaper Homes. This is especially happening in Big Condo/Apartment Complexes. I have heard and read reports of elevator issues and other Mechanical issues, and the mechanical ones always pop up when you cut back. The details are much more important, and hence failures much more likely. Also the quality of hardware throughout the property, seems to be a big issue I hear and read about. From drawer sliders to cabinet door hardware. It does make a difference.
– If the median home has 4 bedrooms six months ago and only 3 bedrooms now, a direct comparison is no longer valid. Room size and yard size is important too, even if the number bedrooms is the same.
> So are taxes and they are often by bedrooms. I bought a 3 bedroom and turned it into a 1 bedroom, as I didn’t need the BR and didn’t want to pay taxes. I am adding a second BR back, but need to await my next assessment to snag 4 more years out of it. My point is there are many, many reasons for changes, and they often have nothing to do with what one may think, as in my example, and a few friends of mine as well, have done changes for reasons not common.
Just way too much BS with the numbers going on. The Government’s involved at the Federal and State level, and pulling all sorts of shenanigans for their needs to get more money, or more homes or whatever the Agenda. I just know, that I don’t appear to be in the things they are addressing. I am paying for it, involuntarily of course, as I wasn’t allowed a say in the matter.
Zimbabwe Syndrome.
Exogenous “events” will send SPX and C/S down. 1.4 million Palestinians are sandwich between Bibi and El Sisi. Biden said : don’t. The pressure on Hamas last stand is rising. Option #1 : the Palestinians will finish off Hamas. Option #2 : Jasa & Lebanon pressure cooker will explode.
Yesterday, during Radio City fundraising, pro Palestinians yelled at Biden : “blood on your hands”. They want the fantasia to cont for ever.
I get offers every week from opendoor/etc.
few months ago they offered $342k for my house – last week it was $309k
couple weeks ago another home on my street (smaller by 500SF) listed for $525 and under contract in couple days
oops opendoor are you trying to low ball me?
based on this listing I should be at $575
C/S, positively biased, found a few more pairs that were bought in the 90’s and sold 3 months ago, that skew up the charts. The silent/boomers are selling their houses for 4%/5% dividends.
OER is more positively biased than C/S.
I repeat.
TINA 2 FOMO
To Infinity and Beyond.
.
In Austin, Texas some houses have already gone down by (some) 25%.
Homes have become financialized. They are an asset, just like stonks. Their utility does not matter in this arena.
You are right. After the GFC, where poor Home owners were BOOTED from their Homes and Blackstone scooped up those foreclosed units and put them into a huge RENTAL POOL, then Houses became like a pile of Steel: a COMMODITY to be used as a Trading and source of dividends (Rents).
From Fast Company: “….. Blackstone Real Estate Income Trust was ready to jump back into the single-family space with its $6 billion purchase of Home Partners of America, which at the time owned 17,000 U.S. homes.
Jan 23, 2024.”