Biggest Annual Drop in Over a Decade
Redfin notes the Biggest Annual Home Price Drop in Over a Decade.
The median U.S. home sale price fell 3.3% in March to $400,528, the largest year-over-year drop since 2012. That follows February’s 1.2% dip, which was the first annual decrease since 2012.
Median Sales Price by Location
Self-Serving Fluff
“I was consistently busy in the fall, but things got really quiet in March after the collapse of Silicon Valley Bank,” said Boise Redfin real estate agent Shauna Pendleton. “That killed the buyer momentum that had been building and brought us right back to where we were last year when mortgage rates shot up. There’s this fear that everything will crash. There are bank failures, inflation, recession fears, mortgage-rate volatility, a war in Ukraine, spy balloons—some people are wondering if they should pull their money out of the bank and park it in a safe rather than spend it on a new home.”
Pendleton continued: “The irony is that it’s actually a pretty good time to buy in Boise. The dropoff in homebuyer demand means that prices are falling and many sellers—especially homebuilders—are offering concessions. It’s not uncommon for a buyer to get a home for less than the list price.”
That second paragraph above is the biggest piece of self-serving fluff I have seen since the end of the Great Recession.
Until the Fed spawned bidding wars with ultra-easy money, it was uncommon for intense bidding wars above the asking price. Asking and actual prices have been insane.
Until prices plunge and mortgage rates come down, affordability will be stretched. But to a real estate agent, there is always an excuse why this is a great time to buy.
Bidding Wars Still Happening
“Low inventory is driving the market and causing bidding wars to intensify. I have two listings that have each received around 10 offers in the past few weeks,” said Dan Close, a Redfin real estate agent in Chicago. “Buyers’ agents are trying so hard to find homes for their clients that they’re calling me before my listings even hit the market. I did a consult with a seller recently and before we had anything in ink, three brokers phoned to say they’d heard about the home through word of mouth and wanted to know more. We had two above-asking offers on the $2 million home within 24 hours. There weren’t even any photos online yet.”
One loft in Chicago’s Lincoln Park neighborhood recently sold for $125,000 over the $500,000 asking price. The property needed some work but was underpriced, Close said. One bidder offered to pay cash and waived both the appraisal and inspection contingencies and still didn’t win the bidding war.
“One of my sellers recently got multiple offers on their home, but pulled the listing off the market when they found out their interest rate was going to double,” said Bowers, the Nashville agent. “There are a lot of homeowners who don’t want to give up their 2.5% or 3% rate for a 6.5% rate. Both buyers and sellers are having a tough time adjusting because rates are swinging up and down so quickly.”
Transaction Dry Up
That last paragraph makes perfect sense and I have commented on that aspect many times. Transactions have dried up.
People who want to move are effectively trapped in their houses because they do not want to trade a sub-3% mortgage for a 6.5% mortgage.
The bidding wars we do see are from people who are price insensitive. They make for amusing anecdotes but the following discussion is the real picture.
Housing Crash
Why do you persist in asking absurd questions based off one sale?
THIS Housing Crash
The economic fallout from fewer sales is far more important, for obvious reasons, than a price crash.
OK 2008 had both a transaction and price crash. This one likely to last longer. pic.twitter.com/nB9uCP3E0F
— Mike “Mish” Shedlock (@MishGEA) April 19, 2023
Me: “THIS Housing Crash The economic fallout from fewer sales is far more important, for obvious reasons, than a price crash. OK 2008 had both a transaction and price crash. This one likely to last longer.“
This crash is likely to last longer because intertest rates are likely to stay higher for longer because the Fed fears stoking more inflation.
Home sales mean appliance sales, new furniture, cabinets, new carpet, landscaping, etc. Who doesn’t spend a lot more money when they move into a new home?
Case Shiller Home Price Index
Median Price vs Repeat Sales
- Median price is timely but highly inaccurate.
- Measures or repeat sales of the same home as per Case-Shiller methodology are accurate but severely lagging on the way up and down.
Home Prices Are Falling Everywhere, But Not as Fast as They Rose
On April 1, I commented Home Prices Are Falling Everywhere, But Not as Fast as They Rose
Home Price Synopsis
- Home prices have peaked this cycle but the decline is certainly tiny compared to the run up.
- There is a two-month lag in reporting. The latest report is for January and that represents sales primarily made in November and December.
- The declines shown are undoubtedly understated by a lot.
- Declines will accelerate but not fast enough to revive a housing market that has soured dramatically.
Percent Change From Year Ago
The declines in the above charts are lagging by 3-5 months. Nationally, Case-Shiller reports home prices are down 5 percent.
That is a far more realistic measure of the housing market than the Redfin 3.0% assessment. One reason is high end buyers are less price sensitive than at the low end where sales have dried up.
Given the lags, home prices are probably down 8 percent or more nationally.
Compared to the price runup and rise in mortgage rates, an 8 percent decline is nowhere near enough of a decline to revive housing.
Buyers and sellers are trapped but in a much different way than 2008.
Fed Minutes Now Predict a Recession This Year Along With Higher Unemployment
Please note Fed Minutes Now Predict a Recession This Year Along With Higher Unemployment
Also note that 70 Percent of Americans are Financially Stressed, 58 Percent Live Paycheck to Paycheck
The naïve view is that housing cannot crash unless prices crash. The reality is transactions have crashed, and weak home sales portend a weak economy for a long time.
Fed Chair Jerome Powell has admitted as much.
This post originated on MishTalk.Com.
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