Case-Shiller home prices fell 0.3 percent in April.
Case-Shiller home prices fell 0.3 percent in April after declining 0.1 percent in March.
The lead chart puts things in perspective.
What Is Case-Shiller?
Case-Shiller measures sales prices of the exact same home over time. It factors out major improvements.
It’s a better measure than median or average prices because the latter does not factor in square footage, location, lot size, or amenities.
However, Case-Shiller is a lagging indicator.
The latest report is for April but that includes sales for February, March, and April. Moreover, the sales reflects the date when the sales closed, not when the contracts were signed. February closing prices could include contracts signed as far back as December.
On average, April represents January or February prices. In declining markets, prices are lower than the report indicates and in rising markets prices are higher than the report indicates.
All existing-home measures lag, but Case-Shiller more than NAR reports.
Percent Change Since January 2020
- Case-Shiller National: 52.5%
- Case-Shiller 10-City: 52.6%
- OER: 41.2%
- CPI Rent: 27.8%
- CPI: 24.0%
Owners’ Equivalent Rent (OER) is the price one would pay if they rented their own house, unfurnished, without utilities, instead of owning it.
No one pays OER. And on that basis many claim the CPI is overstated. From the point of view of those wanting to buy a home, the CPI is very understated.
It’s easy to feel bad for Millennials and Zoomers priced out of homes rising more than double the alleged CPI.
Percent Change From Year Ago
Mess Entirely of Fed’s Making
This is a mess entirely of the Fed’s making. And it’s what happens when the Fed, and economists in general do not count home prices as inflation.
Home prices are not directly in the CPI or PCE. The latter is the Fed’s preferred measure of inflation.
Economists consider home prices a capital expense not a consumer expense. The problem is simple: Inflation is not just a consumer price concern!
The Fed ignored obvious inflation in the Great Recession and did so again in the Covid recession.
The Fed does not know what to do now because there is no good answer.
For homes to become affordable again. mortgage rates need to decline and home prices need to fall dramatically.
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This is a mess entirely of the Fed’s making. And it’s what happens when the Fed, and economists in general do not count home prices as inflation.
Bernanke: “Lower mortgage rates will make housing more affordable and allow more homeowners to refinance. Lower corporate bond rates will encourage investment. And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending,”
Bernanke of course is wrong. Saver-holders need higher real rates of interest where funds are expeditiously activated into real investment outlets.
I know this is contrarian to what a lot of people around here believe. But I’m of the opinion that as the baby boomers die off, this is going to keep home prices elevated.
The 2025 Estate Tax Exemption is $14M, so I’m specifically talking about estates under this amount, which therefore owe no taxes. You and your sister inherit your parents’ home. You immediately get the stepped-up value up to what it’s worth today.
So if you turn around & sell it quickly, you’re going to have a lot of money to turn around & buy a house that you didn’t have before. In addition, you’re probably inheriting left over IRA monies, stocks and possibly bonds.
All else being equal, I don’t see how this isn’t going to be buoyant for home prices over the next 15-20 years.
Trust me, I would love to see prices tumble, giving younger buyers a much better opportunity at owning.
It’s an interesting take.
My response would be lets say parents house is paid off and worth 500K. If brother / sister sell and split (most likely scenario since one is unlikely to have 250K to buy out the other) they both end up with 250K. But that’s not enough to buy a home on it’s own so either they both suddenly buy (assuming they don’t already own now) with huge mortgages or they just use that 250K to pay down debt (car/credit cards/kids college etc) and take some vacations.
The other thing you aren’t factoring in is people living longer. The odds parents die in their home diminishes greatly the older they are (ie 80 year olds more likely to be in assisted living than still in their own home and that gets worse for 85 year olds and so on) and if one spouse dies significantly before the other one that’s another reason parents won’t still own their home but will move to apartment/assisted living as a single.
Where were the kids living before? Under a bridge? This guy is doing some serious mental gymnastics to come up with a theory of why more dead people means more housing demand.
In 2025, there are more than 11K Baby Boomers dying every day. This is peak death year for them. So basically, it’s been building towards this year for at least 10 years and then is going to continue for another 10 years before dropping off.
First, you’re arbitrarily pulling $250K out of the air and you’re obfuscating the overall point I’m trying to make by bringing in assumptions about death rates. I’m talking in general. There’s an enormous wealth range across the Baby Boomers and the last I checked, COVID has caused life expectancies to shorten of late..
Again, like I said in a different thread, explain to me how what is left over from $87T of boomer wealth, doesn’t create a buoyant market for home prices?
There are MANY reasons why housing has gone up since 2010’ish: The Fed, Congress, stock markets, etc.
Well, IMHO there’s at least one more very important one: The Great Boomer Wealth Transfer. It’s dropping massive amounts of money into early GenX’ers as well as Millennials. And it’s been going on steadily for at least 10 years.
The real issue with your theory is the distribution of elderly and housing. Most seniors move from north to south when they retire. The south is where too much housing is being built already. Housing values in the south are dropping now despite peak deaths. There is a shortage of housing in the north because of under build.
Then you have Florida where insurance, HOA, and disasters are making it unaffordable and undesirable to live there.
Florida, TX & TN are the only southern states where prices are down significantly. Yes, there’s too much housing in those areas. But long-term The Great Boomer wealth transfer is going to prop up housing prices overall. I just don’t see how anyone thinks this sort of massive transfer of wealth is going to be deflationary for homes. Now, I’m not calling for housing to shoot up in prices like crazy. My prediction simply might mean that prices simply don’t fall to the level that they need to, all else being equal which is primarily concerned with the results from a recession.
I completely agree with your last statement.
not to mention FL and TX and TN are making life miserable for any females who want ownership of their own bodies and pre natal decisions……….
Average Boomer wealth is 1.2 million but the median is just 200K (in other words half have less than 200K wealth). So half of all Boomers don’t even have enough wealth to own a home (avg 400K).
For the Boomers who manage to die in their homes (ie not in assisted living / nursing home / living with kids etc), those homes will get passed to their kids. That’s clearly <50% (based on median wealth) of all Boomers.
What do you think the GenXers are going to do with the inheritance? If they are already owning a home (GenXers have solid home ownership) then they likely sell it (pushing down prices) especially if there are 2+ kids to divide the money between. Maybe keep it an rent their parents home out if they are an only child don’t need to divide assets.
But there is no real expectation that dying Boomers are going to keep home prices propped up.
Who are they selling the house to? Someone else who just got rich selling their dead parents’ house? I believe we call this a self licking ice cream cone.
I’m primarily talking about two groups: renters & those who can afford to move up, if they have a big chunk of money dropped in the lap from deceased parents.
How is this hard to recognize that this represents SOME of the existing & new homes sales. There’s not mental gymnastics to jump though.
The Baby Boomers have at least $87T in total wealth to transfer. This has already been going on for years. How is it not likely that this is having a buoyant affect on home prices?
Everyone seems convinced that as the Baby Boomers die off that this is going to cause a crash in homes prices? Again, all else being equal, how is this massive transfer of wealth from an older generation to a younger generation who has a lot less home ownership going to cause prices to fall?
I don’t see it.
you are correct. it’s quite simple really. other factors drop prices. mostly banking related, like printing and foreclosures……like potentially the CRE next few years. not transferring to heirs. that’s one pocket. also less boomers means less demand of stuff, which might make their heirs currency worth more buying power……with food clothing energy healthcare etc….
The problem is not entirely of the Fed’s making. The problem is almost entirely of the federal government’s reaction to COVID in both the Trump 1 and Biden administrations. The Trump administration’s call for economic shutdowns coupled with massive money printing pushed people out of big city apartments and into single family residences which exploded prices. The Biden administration added in with more massive money printing while reopening the economy with far too little production. The Fed cut interest rates to keep the economy from total collapse. If you wanted to keep housing prices from exploding, Trump should have told Fannie Mae not to accept any mortgages without a 30% minimum down payment.
The reason the fed is at fault is that the fed did the money printing and subsidized massive amounts of government borrowing.
Presidents don’t care about house prices exploding. Since most voters own a home, increasing prices (values) means more nominal wealth. Besides, they like to brag about “home ownership rates” and they’ll use every gimmick to get there. The latest one is “First Generation” down payments grants. No politician brags about stopping home values from rising.
Most people (my guess – 60-75%) have housing payments that are below market. That includes renters like myself who are paying below market rents because they are long term tenants whose landlord hasn’t increased rent in line with the current market.
When those 60-75% have to move for whatever reason, they will feel the pain and it could be a headwind on further rent and housing increases.
2.375 here, Nov 2021 refi
Sub 2.4 is whack!
Great timing!
zero debt is best. zero rate. less stress so investing in r/e and stocks etc…….is much easier…….live longer too.
Home prices in lower Fairfield county CT are out of control. 3 br 1600sf 900k, multiple offers. The third BR is 9×7!! A similar house is renting (furnished) for $7250/mo. Average income in Westport CT? >$500k/yr. Only the rich and poor and trust funds need apply. (Good luck if your poor: subsidized housing requires <$3000 in assets and <1.5x poverty level (=approx $40k/yr)
The whole state of CT is like this (as well as MA and RI). CT housing prices lagged behind the rest of the country in the 2010s. By the pandemic, the prices were a “bargain” compared to surrounding states. The ironic thing is prices have increased more sharply since interest rates were raised to 7% than before. There’s no supply. Ditto for rentals.
My old boss sold her house last month and got 12 offers. Sold for $40K over asking. It’s only a 2BR but went for $365K.
And there’s a decent chance it was sold to someone who recently received a lot of inheritance monies. It’s about the only thing that makes sense.
Why I don’t live in Fairfield County (one of hundreds of reasons)
See my post above. I would attribute “SOME” of this to the boomers dying off. They’re passing along a ton of money that just falls into beneficiaries’ hands, so they’re plowing it right back into overpriced real estate. Often times, they’re paying cash or they have so much cash to put down that they can afford a 7% mortgage for now at least.
The bankers want it to rain viagra on their greed orgy.
Home prices in my area have been flat since May of 2022 (meaning inflation on them for this time period has been 0 percent). Rates have changed (gone up), so peoples payments have definitely risen. Home Insurance premiums have gone up without a doubt. That is based on both profiteering, and the fact that the price of the homes skyrocketed between 2020 and early 2022, due to outrageously low interest rates making payments more affordable for those who purchased then. Lastly, property taxes have increased as well, again, due to the fact that the value of the homes previously increased.
In the end, that short 2 years of ultra-low mortgage rates, skewed the market higher, and it will take a long period of low to no price appreciation until homes become affordable again.
It might be happening right now, as all of the sudden there is a lot more inventory of homes available. We won’t know until the fall, when we see if those current sellers chose to lower their prices, or simply take their homes off the market.
“In the end, that short 2 years of ultra-low mortgage rates, skewed the market higher, and it will take a long period of low to no price appreciation until homes become
affordable again.”
100% correct. A bit more than a year ago we all knew there was crazy money sloshing around from the free money Covid giveaways. The consensus then was it would take till the end of the decade (2030) for it to finish sloshing around. If housing prices go sideways till 2030 that would give about 7 years of no gains which would be in effect a 23% reduction in prices based on 3% a year inflation for 7 years.