Home Prices Falling But Remain Very High, San Francisco Negative From Year Ago

January 31, 2023

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6:58 pm

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12 comments

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Economics

*Case-Shiller home price data via St. Louis Fed, chart by Mish*

Home Price Synopsis

Home prices have peaked this cycle but the decline is certainly tiny compared to the run up.
Case-Shiller data lags. The latest data is from November and that represents sales primarily made in August, September, and October so the declines shown are undoubtedly understated by a lot, depending on the market.
Declines will accelerate but not fast enough to revive a housing market that has soured dramatically.

CS National ,Top 10 Metro, CPI, OER Index Levels

*Case-Shiller home price data via St. Louis Fed, CPI, OER, and Rent from the BLS, chart by Mish*

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” beyond it’s wildest dreams.

Rent, OER, Case-Shiller Percent Change From Year Ago

The year-over-year CPI has finally peaked this cycle as have home prices. I added a new chart to show year-over-year home prices in the 10 top markets.

Case-Shiller Home Prices Percent Change Year-Over-Year

City Differences

Miami was still up 18.53 percent from a year ago having topped at 33.71 percent earlier in the year.
Chicago is up 7.63 percent. It had the lowest year-over-year gain at 13.08 percent.
San Francisco is the only city with a year-over-year decline. It’s at -1.48 percent as of November.
Eight of the ten cities are clustered from 4.45 percent (Los Angeles) to 8.13 percent (New York).

Don’t dwell too much on the percentages because the data is stale.

But do compare Chicago and New York with their high taxes to Miami with low taxes. Prices reflect an escape from tax hell. Cities in California are joining that club.

This post originated on MishTalk.Com.

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vanderlyn

3 years ago

great analysis mish. you are great with r/e. btw, NYC has gained populaiton past 20 years. and residential taxes in 5 boros very cheap. and no need for auto. another huge savings. and we now have the added bonus of about 60% of workers are non native amerikan born. they hustle and do less crime than amerikan borns. renting here is quite reasonable too once one takes away cost of autos and fuel…..as heating costs here cheap. and incomes very high. i’m personally havent been employed in decades, but NYC is cheap after tax. why so many here have so much dough saved. food high quality and cheap………….too. i’ve lived all over the country and back here after being gone 30 years. it’s cheap. really.

Sunriver

3 years ago

Boise Idaho report:

My house value is down 22% from the peak in March 2022.

Houses in my neighborhood that have sold recently, had the typical price drops and were on the market 3 to 4 months.

Vegas, Phoenix, Boise, Salt Lake, Spokane, Bend, and other inland western cities house prices will suffer.

Theodore

3 years ago

Agreed. Great analysis and post Mish.

Robbyrob

3 years ago

It looks like people are actually moving back to San Francisco

https://www.vox.com/recode/2023/1/18/23542444/san-francisco-bay-area-population-moving-linkedin

dtj

3 years ago

Wolfstreet claimed a few months ago that the decline in mortgage rates in November was just a bump on the way up to higher levels. Nope. They’ve been trending down since peaking on 10/21/22. They go down every time the Fed announces a rate hike. I predict mortgage rates will keep trending down.

Coincidentally, the stock market bottomed out around the same time as mortgage rates peaked (S&P @ 3,491.58 on 10/13/22). I predict that was the bottom this cycle. Keep in mind the dollar has been devalued about 30%, so that 3491.58 figure is actually 2444 in pre-pandemic dollars.

Six000mileyear

3 years ago

Reply to dtj

The 60 year interest rate cycle has bottomed after the peak 40 year ago. The general trend for the next ~20 years will be UP for interest rates. There is still some upside remaining in the 4 year interest rate cycle. There will be some dips along the way.

Mish

3 years ago

Someone, I believe Shamrock, wanted my real interest rate calculation based off Case Shiller. Coming right up.

hmk

3 years ago

Reply to Mish

Any way to figure what the CPI would be if they included home prices instead of the OER. This statisical smoke and mirrors is why the real CPI is very much understated. I wonder why this is not pushback of that ever.

TexasTim65

3 years ago

Reply to hmk

Because very few people are buying a home in any given year. If you haven’t bought a house in the last 3 years (since early 2020) it’s all been a big nothing burger because you either own outright or have fixed mortgage payments that aren’t changing.

Obviously for anyone who has bought in that time frame they have a very different experience than those who haven’t.

Mish

3 years ago

Reply to TexasTim65

Not at all a nothing burger. It creates real bubbles with long-term economic damage.

TexasTim65

3 years ago

Reply to Mish

Mish, here’s a question I’ve been wanting to ask. How big of a bubble do you think we are in right now real estate wise. Double, triple, quadruple?

Over the Xmas holidays I was chatting to my parents about real estate since they are eventually going to have to sell their home given they are in their early 80s now. They reminded me that in 1965 (year I was born) they bought their first house for 14K or so. In 1978 when we moved to the house they are still in, they sold that 1st house for 44,900 (call it 45K). That means in 13 years, the home value tripled (14->45) and in 1978 interest rates were vastly higher than today.

If I look at the top chart it peaks at 800 in 2022. If I go back 13 years to 2009/2010 it was around 250-300. So in 13 years it’s tripled. Not much different than 1965-1978 time frame. Would you say you remember home prices being in a bubble in 1978?

Hence my question of how much of a bubble do you think we are in given real estate has moved like this before.

vanderlyn

3 years ago

Reply to TexasTim65

great question and point. i bought in 2011 and 2012 in phoenix. investment properties. sold in end of 2021/first half 2022. basically almost 4x in decade. since summer 2022 those same properties down i’d guess 15% off top. i lucked out but have done 3 r/e cycles in my life in 4 different states. to simplify for whatever reason it’s up for 10 to 15 years and down for about 5 years. of course some times in past century it’s been much worse. some hoods in some cities and rural areas, down for 20 years. i know hoods in nyc were down from top in early 60s and didn’t make par until 90s. 30 years. oh well. it’s a great tax efficient way to gain wealth if one doesn’t get to leveraged and sticks to what they know. and don’t be afraid to sell. as bernard baruch said, he got rich by selling to early

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Home Prices Falling But Remain Very High, San Francisco Negative From Year Ago

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