Home Prices Sink in Every Major Market, What About Year-Over Year?

December 28, 2022

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12:38 am

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30 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 October and that represents sales primarily made in July, August, and September 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.

CS National, Top 10 Metro, CPI, OER Percent Change

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

Home prices are falling fast in every market with San Francisco leading the way and Miami lagging badly.

Year-Over-Year Percent Changes by City

Boston: 7.66
Chicago: 8.84
Denver: 7.94
Las Vegas: 9.42
Los Angeles: 6.63
Miami: 21.04
New York: 9.34
San Diego: 7.57
San Francisco: 0.66
D.C: 6.00
National: 9.24
10-City Average: 8.01

Don’t believe any of that. Those prices are very stale.

I suspect that at a minimum, San Francisco, San Diego, and Los Angeles are all in the red with many more cities approaching that level.

Zillow Comparison

Zillow says that prices in 99 percent of the nations 400 largest housing markets are still up year-over-year.

I do not believe that either although Zillow claims its methodology is more timely.

For discussion, please see How Accurate are Zillow Year-Over-Year Home Price Estimates?

Amusingly, last month Zillow said the home price correction is over. Zillow then retracted that statement but is still talking about a bottom near at hand.

What a hoot. Zillow is acting like a housing cheerleader even more so than the National Association of Realtors.

See the above link for their methodology.

This post originated on MishTalk.Com.

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BigGringo

1 year ago

The Big Question is, why is there not a Texas city in the Case Schiller index (Houston? Dallas?)

Jack

1 year ago

Reply to BigGringo

Always surprises me Phoenix is not on the list either – even though sixth largest city.

Directed Energy

1 year ago

Prices are not down in Madison / Huntsville Alabama, but we are experiencing explosive growth in Aerospace and automobile manufacturing. Huntsville won #1 city in America to live this year, and zip code 35758 is just truly a phenomenal place. Madison is a nationally top ranked school system, and the Cummins Research Park and Redstone Arsenal are only a 10 minute commute. Huntsville is special!

Salmo Trutta

1 year ago

HOUSING IS THE BUSINESS CYCLE

Housing IS the Business Cycle | NBER

Congress determines how housing is financed.

Salmo Trutta

1 year ago

Moderation is censorship.

Salmo Trutta

1 year ago

It looks like housing turned when the “cash-drain” factor turned.

aaswing

1 year ago

There is another possibility. Rents can go up rapidly while home prices stagnate at current levels. That is a real and probably likely scenario given the amount of inflation in the system.

desertsteve

1 year ago

I am curious as to why they don’t include Phoenix in Case Shiller. 5th largest city in the country, makes no sense.

worleyeoe

1 year ago

“Declines will accelerate but not fast enough to revive a housing market that has soured dramatically.”

How are accelerating price declines even remotely going to REVIVE the soured housing market? I think this needs to read:

Declines will accelerate, ensuring the housing market sours even more in coming CSI updates.

I think Tampa was up 32.7% YoY which goes to show you how crazy that market spiked and how slowly prices are declining. Granted, these are MoM declines, but an area like Tampa needs to see sustained 3% MoM declines for most of 2023 to do any real correction.

There are a lot of homes that surged in value by 100% or more in as little as 3 years. My house doubled in 4 years. Unless there’s a national 25-30% decline without rent & mortgage forbearance making a comeback, then we’ll be left with the same old unaffordable housing issue.

BDR45

1 year ago

SFRs still seem to be selling rapidly here in N. Florida. I think, partially because of tax refugees from New Jersey, New York, etc. and the lower costs of housing here (Tallahassee).

Mouse

1 year ago

Reply to BDR45

Living in N Florida, you really cannot appreciate how many NY/NJ/CT/PA residents want to get the $#%% out of failed states. I know you see stuff in the TV or in the papers, but you really don’t understand how screwed up the NYC region is.

Thanks to an incompetent and corrupt Andrew Cuomo, who was so bad his fellow left wingers couldn’t tolerate him, the Indian Point nuclear power plant was closed more than a decade early (reminds you of California stupid?). So electricity rates are roughly doubling. Thanks Cuomo, you jack@ss!!!

MPO45

1 year ago

Wealthion had Nick Gerli on his show a few days ago talking about the housing national market. The comment Nick made during the interview was spot on saying that sellers are still stuck in fantasy land of yesteryear home prices and many don’t want to sell at lower prices. This will continue until the recession and mass layoffs hit and sellers have to choice but to take what they can get. It took a full five years for the 2007/08 housing mess to normalize.

link to youtube.com

The Fed still plans on raising interest rates and that *should* drive mortgage rates up again. Inflation is still out of control globally despite cheers on 6 or 7 percent CPI.

I still hold puts on XHB $55 strikes for January 2024. One more year to go.

Salmo Trutta

1 year ago

Reply to MPO45

re: “It took a full five years for the 2007/08 housing mess to normalize”

P*T = M*Vt. Like OIL, housing prices depend upon Gresham’s law: “a statement of the least cost
“principle of substitution” as applied to money: that a commodity (or service)
will be devoted to those uses which are the most profitable (most widely viewed
as promising), that a statement of the principle of substitution: “the bad
money drives out good”.

For four years, there was no growth at all in the primary money supply. I.e., the GFC is very different from today.

As David Stockman
pointed out in his book “The Great Deformation”: “The preponderance of their
fabled profitability, however, was generated by massive trading operations
which scalped spreads from elephantine balance sheets that were not only
preposterously leveraged (30 to 1) but also dangerously dependent upon volatile
short-term funding to carry their assets. Indeed, perched on a foundation of
several hundreds of billions in debt and equity capital, these firms (Goldman,
Morgan Stanley, Bear Sterns, Lehman, and investment banks inside Citigroup and
JPMorgan), had become voracious consumers of “wholesale” money market funds,
mainly short-term “repo” loans and unsecured commercial paper.”

I.e., like the DIDMCA of March 31st, 1980 (which turned the thrifts into banks), financing has determined housing prices. Bankrupt-u-Bernanke, along with Zoltan Pozsar, destroyed short-term financing. I.e., “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.” I.e., M1 was allowed to approach M3. “The role of the S&Ls in housing finance diminished
significantly”.

In the GFC, housing bottomed with the remuneration rate on IBDDs (which exceeded all short-term funding up to two years out or the “taper tantrum”).

Mouse

1 year ago

Continuing with the other topic du Mish: after last weekend, everyone in USA with a pulse knows the US power grid can barely (sort of) handle a few cold days. And from July / August, we know the US grid cannot handle hot days either. The US grid can barely handle normal conditions, and any harsh weather, hot or cold, sends it into chaos. Somebody explain the stunningly obvious to @jackWebb — who is either a fool or he knows better, and hoped no one would call his bluff.

And today, the German paper Der Spiegel reports that Switzerland is considering a ban on EVs in order to protect their power grid from blackouts. Nope, not a typo. Switzerland may soon ban electric vehicles because their power grid is barely holding its head above water. People attempting to charge their EVs could send Switzerland’s power grid into cascading collapse.

There is no chance that G7 countries are going to implement widespread EV use in the next 15 years. Energy density in batteries is not there. And even if it was, the power grids cannot charge a significant percentage of cars if they were electric.

EVs will have to wait until at least 2045 before they have even a shot at widespread adoption.

Mouse

1 year ago

Reply to Mouse

PS — sorry, I have nothing to add to the home price discussion. I doubt many of the numbers currently being banded about — because I don’t think there are many sales now. Few sales means little price discovery, and forced sellers have to take whatever offer they can get.

It may turn out that Mish is correct, once we get liquidity and price discovery. A lot of people are overextended, and mortgage payments are much higher when interest rates are almost normalized. The zero / near zero “temporary” stimulus rates that central banks were forcing for the last 15-20 years were anomalies; as were the inflated prices they made possible.

As interest rates normalize (I’m thinking short term rates around 5-5.5%?) then home buyers will need to reassess. Then we will get some price honest discovery. Mish may turn out to be correct whenever that happens.

MikeC711

1 year ago

Reply to Mouse

First concern is that politicians believe that politics can supercede laws of nature. They are already looking at government doing vastly more deficit spending to “reduce inflation”. I certainly could see someone providing more home buying stimulus and/or artificially lowering rates again. They believe that they can supercede human nature as well. That said, one thing that will keep prices from crashing is that folks who would be looking to sell … are looking at trading out their 3% mortgage for a 7% mortgage … and even a downsize will increase their payment. So with builders cutting back and only folks forced to sell bringing supply to market … it is likely that supply will stay low.

Mouse

1 year ago

Reply to Mouse

I forgot to include the link to the Swiss banning EVs story

link to spiegel.de

Its in German. Google translate if you need to.

Zardoz

1 year ago

Reply to Mouse

“draft resolution”

The Swiss have not banned EVs.

MPO45

1 year ago

Reply to Mouse

People will realize that converting from ICE cars to EV cars doesn’t solve anything. All that does is shift the over consumption of resources of a type (oil & gas) to another type (electricity). The same holds true for food. Switching from “meats” to grains/veggies won’t solve anything either. We will have food shortages because humans are human-locusts over consuming everything on the planet.

There has been a magical belief that this planet can support endless 4,000 square foot mcmansions for everyone on the planet. that is not the case. People are complaining about quality of life going down for younger people – yeah it’s called competition for resources. China, once lived mostly on $2/day but now has a middle class larger than the US. Guess what they have been doing? They have been buying up those 4000 square foot houses in Canada, Europe and the US because they have the means. Guess who that leaves out – Anyone that doesn’t have the same means.

This problem isn’t going away anytime soon, there will be more and more demand and less and less resources available across the board from energy, labor, food, healthcare, etc. Those dystopian movies have all started to become true in one form or another from Soylent Green to Brazil. It’s only going to get worse because no one wants to give up the good life. No one.

Lisa_Hooker

1 year ago

Reply to MPO45

The problem is the “average” person does not understand the curve of an exponential function, and they have little or no understanding of entropy or the principles of thermodynamics. I think people as a whole are ergodic, but that’s a personal opinion. We will not be bailed out by the Tyrell Corporation.

Sunriver

1 year ago

Boise. My house value is down 20% in 8 months. Appraised value is now lower than assessed value. I fully expect another 15 to 20% drop from the current value. From $500,000 at the peak down to $325,000 by the end of 2023.

House is fully paid off, but more importantly, I pray housing becomes affordable for the next generation which is now like 35 to 40 years old.

vanderlyn

1 year ago

nice analysis. thanks for doing the case /shiller analysis so quickly and forthrightly. much appreciated.

shamrock

1 year ago

Anyone else getting 80 sponsored advertisements “recommended by Outbrain” on a single page recently, in addition to the normal ads? Pretty annoying.

Zardoz

1 year ago

Reply to shamrock

yup… pages of them

shamrock

1 year ago

Reply to Zardoz

Ok, I’m glad it’s not just me, I was worried that I had gotten some malware on my machine.

Maximus_Minimus

1 year ago

Reply to shamrock

Depends on your ad blocker.

shamrock

1 year ago

Reply to Maximus_Minimus

I’ve avoided getting an ad blocker because advertisements allow free content, but this was so bad I had to install one. Problem solved.

Maximus_Minimus

1 year ago

Reply to shamrock

Maybe try Brave, which replaces ads with their own, and supports the project. Else you have Google all the way.

Lisa_Hooker

1 year ago

Reply to Maximus_Minimus

I like AdNauseam which degrades the intrusive advertisers database by obfusticating your data while running in the background.

worleyeoe

1 year ago

Reply to shamrock

I’m running MS Edge Browser in Strict mode and see ZERO ads on Mish’s site.

Home Prices Sink in Every Major Market, What About Year-Over Year?

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