Existing home prices hit a new record high in September. Please thank the Fed. 
Chart Notes
- National and 10-City Case-Shiller home prices hit new record highs in September.
- 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. However, the price in all 10 cities increased for the fifth straight month.
Huge Collapse in New Home Sales on Top of Steep Negative Revisions
New home sales revisions yesterday were exceptional. I created a new chart to show the changes.
New home sales revisions yesterday were exceptional. I created a new chart to show the changes.
For discussion, please see Huge Collapse in New Home Sales on Top of Steep Negative Revisions
Case-Shiller is about existing-home prices which Case-Shiller shows are still rising.
Existing Home Sales Hit a New 13-Year Low
On November 21, I noted Existing Home Sales Sink 4.1 Percent, Down 19 of the Last 21 Months
Existing-home sales are down 40 percent since January of 2022.
Comparatively speaking, new home sales are doing great, down only 34 percent. Yet the price of existing homes keeps rising.
How the Fed Destroyed the Housing Market and Created Inflation in Pictures
For discussion of this dual-track housing bubble with rising prices despite a transaction crash, please see How the Fed Destroyed the Housing Market and Created Inflation in Pictures
Actually, Mish, let’s not forget to ALSO thank the Consumer Financial Protection Bureau for giving us rent & mortgage relief during COVID plus an extra 12 months. THAT’S what kept the country from cratering into a massive recession. Certainly, the Fed’s responsible for what happened over the next 18 months with suppressing rates.
Yesterday, we had two Fed officials giving competing theories on what lies ahead for the FFR one day before BLS revises Q3 GDP up to 5.2% and we’re 3 months into a Fed rate hike pause. CME Group says there’s a 98.5% chance the Fed makes it 4 months.
It’s a clown show over at the Fed. They’ll do anything to keep housing from finding itself in a REAL recession. I could care less if there’s been a sales volume crash. What matters is that existing home values rose YoY when most of that time the 30YFRM has been above 6.5%. And new home prices have dropped 18% but big builders like Pulte are still sitting on 36% gross margins.
We have gone into looney toons, people. We are absolutely doomed. Prep up!
the 1% are vacuuming up all the loose change in couch
It’s astonishing, but the FED’s technical staff doesn’t know a debit from a credit.
According to Corwin D. Edwards, professor of economics, Ph.D. Cornell University, the U.S. Golden Age in Capitalism was driven by “increased money velocity which financed about two-thirds of a growing GNP, while the increase in the actual quantity of money has finance only one-third.”
During the U.S. Golden Era in Capitalism (not optimized with 3 recessions), the annual compounded rate of increase in our means-of-payment money supply was about 2 percent. The nonbanks grew faster than the commercial banks (which made Citicorp’s Walter Wriston jealous), and thereby a higher percentage of savings was utilized (through direct and indirect investment) and was also FSLIC and NCUA insured.
M1’s average growth was 1.5% each year (from 142.2 to 176.9). CPI inflation averaged 2.5% during the same period (from 23.7 to 33.1). R-gDp, not optimized, averaged 5.9% during 1950-1966 (in spite of the 3 recessions).
If you exclude the Korean War, 1955-1964, the rate of inflation, based on the Consumer Price Index, increased at an annual rate of 1.4 percent. Unemployment averaged 5.4 percent.
Things ended in 1965. That’s when the commercial banksters began to outbid the non-banks for loan-funds (resulting in disintermediation of just the thrifts).
Yeah, the ABA is still running things. E.g., Powell eliminated reserve requirements. It’s the political economy. The Keynesian economists have achieved their objective, that there is no difference between money and liquid assets.
All monetary savings originate within the commercial banking system. The source of interest-bearing deposits is other bank deposits. The banks compete for the deposits that the system already owns. I.e., the source of large CDs is a shifting of other bank deposits. All time deposits, gated deposits, are derived from other bank deposits. As time deposits grow, e.g., demand deposits, are depleted dollar for dollar.
Link: Profit or Loss from Time-Deposit Banking” in Banking and Monetary Studies, Comptroller of the Currency, United States Treasury Department, Irwin, 1963, pp. 369-386 Dr. Leland J. Pritchard, Ph.D. Economics Chicago 1933
Regulation Q ceilings were imposed on just the commercial banks by the Banking Act of 1933, which activated monetary savings. Regulation Q ceilings weren’t imposed on the nonbanks until 1966 (at the end of the Golden Age in Capitalism). That change created stagflation.
Powell has held our means-of-payment money supply constant for 20 months. Bernanke held it constant for 48 months.
If QT Is Doing This, No Wonder Stocks Are Rallying (zerohedge.com)
Milton Friedman didn’t know:
1. the difference between the supply of money & the supply of loan funds,
2. the difference between means-of-payment money & liquid assets,
3. the difference between financial intermediaries & money creating institutions,
4. didn’t know that interest rates are the price of loan-funds, not the price of money,
5. that the price of money is represented by the various price (indices) level…
Mises has it right:
“The definition of M2 includes money market securities, mutual funds, and other time deposits. However, an investment in a mutual fund is in fact an investment in various money market instruments. The quantity of money is not altered as a result of this investment; the ownership of money has only changed temporarily. Hence, including mutual funds as part of M2 results in the double counting of money.”
It’s virtually impossible for the Central Bank or the DFIs to engage in any type of activity involving non-bank customers without an alteration in the money stock.
You have Paul Volcker: WSJ in 1983: that the Fed: “as a matter of principle favors payment of interest on all reserve balances” … “on rounds of equity”. [sic]
The Romulan cloaking device (payment of interest on interbank demand deposits, on a “Master Account”), vastly exceeded the level of short-term interest rates which was explicitly illegal per the FSRRA of 2006.
I.e., Bernanke destroyed the nonbanks.
Yes, you can blame the FED. Link WSJ April 29, 2008:
Fed Paying Interest on Reserves: An Old Idea with a New Urgency April 29, 2008
Bernanke bankrupted half the home builders destroying supply. Then QE stoked housing prices increasing demand.
And now Powell thinks banks are intermediaries:
Powell: “When times are good in the economy, banks and other lenders tend to have a lot of money to LEND. And in case you didn’t realize, banks are in the business of making money off of loans. So if they can LEND to more people who they believe will pay them back on time, they’ll make more money.
But right now it’s costing banks more to get the funds they need to make loans. Part of that goes back to the Fed’s interest rate hikes. But the other part comes from the recent bank failures. Since many depositors withdrew money from mid-size and regional banks, these banks have less money to LEND.”
Never are the banks intermediaries in the savings->investment process. Every time a bank buys securities from, or makes loans to, the nonbank public, it creates new money – somewhere in the payment’s system.
Houses in the top 5 metros and their suburbs are hardly selling. Houses in the flyover areas are selling, though slowing down. The median price is less than C/S national, which is slightly below the top ten. C/S top ten are less than 7% of the housing market. It’s a blip, a stand alone market.
Lower commissions boosted sales. If we enter a recession it wouldn’t last.
Up 15% yoy in my area in the Northeast. If you don’t jump on a house and offer 5-10% over asking, don’t bother.
Sadly, if interest rates continue to fall, house prices will continue to increase. I doubt sales will reach the Pandemic highs for many years. Wages just won’t support sales and margins for investors will not support sales.
I’m thinking the federal government will offer large down payments for ‘first time’ home buyers in th next couple of years as the realator lobbey belly-aches.
100% financing for well-qualified first time homebuyers is a no-brainer.
Why always blame the FED ? They are only responsible for short term rates while mortgages are set by a force called Mr. Market. Comprende amigo Mish ?
Absent The Fed, a Dollar would be 1/20th of an ounce. With full convertibility, for anyone.
You really think the Pelosis would be offered a million ounces of Gold for their rather average house? If not, The Fed IS responsible. Not the tooth fairy, nor any other mystical force.
Once you have a Fed, there IS NO such thing as a price-setting “market.” Technically not for anything. But especially not for anything serving as common collateral for credit, such as housing.
Nonsense !!! Why always blame the FED for housing prices going up ? This is Austrian school nuttery at its worst.
A LOT OF people moved to (more) rural areas to work from home during the COVID pandemic. Now these people are forced to come back to work in the building they were previously working in. Then is’no surprise that prices in those cities are rising again. No need to blame the FED at all.
Living in an American city is like living in a war zone. Your life is worth nothing. Your house is worth nothing.
It’s not meaningfully worse here, than in any other similarly totalitarian third world backwater.
With transactions reportedly down 40% (and likely much more, practically speaking), how accurate can median prices really be today? It’s like losing half of stock market participants, like all individual players, and expecting stock prices not to be affected.
If you are trying to buy or sell a house right now those numbers are a sobering reality. It doesn’t matter how few participants there are. All that matters is the price you buy/sell for today.
The alternative is to continue to rent (or live with your parents etc) and rents are only going higher too which acts as a push to get more people to try and purchase homes.
Still too much money chasing after assets. Cracking down on money laundering would crash real estate prices quickly. Especially money laundering from China and Russia and also crypto markets.
Home prices are regional. Some are awful, some high, some perfect. Just depends on what region you are in. General rule of thumb however is if you can’t afford to live there then you have to move to a cheaper region.
I’ve talked to younger people and they are not willing to do this. They want to live in the high dollar areas. No. Reality will eventually set in. Have to move to a cheaper area. Not everyone can live the high life. Some must live in the not so high life areas. You can still go to those areas but you can’t afford to live there. All their griping and complaining won’t change this fact. Move into a trailer park. Absolutely affordable.
Young people are also waiting for parents to kick the bucket. There’s a lot of elder abuse going on.
I laugh at those ridiculously expensive “tiny homes,” and think: Why don’t you just get a single-wide?
So who’s buying? People with cash?
Inflation lifts all boats.
Yours truly,
The FED
OER to my ear ranks with astrology. “The data used for calculating owners’ equivalent rent is obtained through surveys, which ask members of a household (called a consumer unit) the following question: “If someone were to rent your home today, how much do you think it would rent for monthly, unfurnished, and without utilities?” ”
Do you know people who rent their own home? Do you know what they pay? Are they renting homes like yours? If you don’t, your number for your OER is an episode in fantasy.
Well, I’m not selling my home. Not anytime soon that is. $240k 10 yrs ago, almost $600k now.
Your comment, common for millions of people, highlights what the undereported inflation and problem the fed created…it’s economic madness to pay someone $3,000 merely to have purchased a home. While millions rent, those like you were paid nontaxable capital gain “rent” to live in your house. Only way this gets resolved is some amount of orderly reduction in home values. Back in 2008/9 mish wrote don’t ask what it’s worth/ don’t sell or you’ll find out. That process hasn’t even begun… but it needs to or nothing will get fixed.
Equals an annual inflation of ~10%.
Sure. You should pull that equity out and buy some silks shirts or something, slick. You deserve it.
Obviously people can afford it if the prices keep going up.
What people? The 100% cash from China and Blackrock are driving the market. And the internet millionaires in USA created by free money for a decade.