Although the 10- and 20-city prices are down for the first time since 2012, the national index is still positive.
And home prices rose nationally for the second consecutive month.
Case-Shiller Home Price Index National and Top 10
Chart Notes
- OER stands for Owner’s Equivalent Rent. It it the price one would pay to rent a home, unfurnished and without utilities.
- Home prices wildly disconnected from the CPI in 2000 and in 2013. The disconnect accelerated in 2020.
The Fed ignored all three occasions hoping to make up for “lack of inflation”. The Fed “succeeded” in producing inflation beyond it’s wildest dreams.
Case-Shiller Home Prices Percent Change from Peak
Home prices generally peaked in June or July of 2022.
Chicago is the 10-city exception. Chicago hit a new high in March.
However, Chicago barely participated in the post-pandemic bubble as shown in the second chart.
Sticky Prices
The year-over-year CPI has finally peaked this cycle as have home prices. But both are falling slowly. Inflation has been sticky.
Home Price Synopsis
- Home prices have peaked this cycle, except Chicago, but the decline is certainly tiny compared to the run up.
- There is a two-month lag in reporting. The latest report is for March and that represents sales primarily made in January and February.
- Declines will accelerate but not fast enough to revive a housing market that has soured dramatically.
Mortgage rates temporarily declined towards 6.0 percent early this year. Mortgage rates are currently about 6.95 percent. So, don’t expect continued price appreciation.
Stalemate
- Buyers want lower prices, but sellers want the prices they could have gotten 18 months ago.
- Existing home owners do not want to trade a 3.0 percent mortgage rate for a 6.50 percent mortgage, the current average rate.
- New buyers cannot afford much of a home because prices have not fallen much but mortgage rates have soared.
Existing Home Sales Decline for the 14th Time in 15 Months
On May 18, I reported Existing Home Sales Decline for the 14th Time in 15 Months
Following a mortgage rate dip that led to a buying surge in January, existing home sales declined for the second month. That surge likely explains the small, recent uptick in Case-Shiller home prices.
Existing-Home Transactions
Despite the uptick in price, transactions are at low levels.
Buyers and sellers are trapped but in a much different way than 2008. The result is a crash in transactions, but not a crash in price.
This post originated on MishTalk.Com.
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Mish
to provide the housing industry with a reliable source of funds. That may be achieved through various
governmental and quasi-governmental corporations. But the role of the S&Ls in housing
finance will probably diminish significantly.”…”Sources
of mortgage funds shifted from the subsidized rates formally provided by the
small saver to “bond-backed” sources which reflecting the interest rates
prevailing in the longer-dated loan-funds markets.”
“Lower long-term rates also tend to raise asset prices, including house and
stock prices, which, by making people feel wealthier, tends to stimulate
consumer spending-the “wealth effect”.