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 September and that represents sales primarily made in July and August so the declines shown are undoubtedly understated.
- Prices are falling now across the board. There is a decline in every major metro area.
- Declines will accelerate but not fast enough to revive a housing market that has soured dramatically.
CS National ,Top 10 Metro, CPI, OER
Home Price Disconnect Notes
- National is the Case-Shiller national home price index.
- 10-City represents the weighted average of the cities in the first chart.
- CPI is the Consumer Price Index
- OER stands for Owner’s Equivalent Rent. It is the single largest component in the CPI with a current weight of 23.65% of the total CPI.
- Rent of Primary Residence is a CPI component with a weight of 7.25% of the CPI.
OER is the price the Bureau of Labor Statistics (BLS) says one would pay to rent one’s own house from oneself, unfurnished, without utilities.
Existing Home Sales
Existing Home Sales Month-Over-Month
Existing Home Sales Decline 9th Month, Down Another 5.9 Percent
On November 18, I noted Existing home sales from the National Association of Realtors via St. Louis Fed
Existing Home Sales Transaction Crash
- Existing home sales are down 28.4% from one year ago.
- Existing home sales are down 31.7% since January.
That’s a transaction crash. And never have we seen such declines other than in recessions.
Prices have just started to decline.
Powell Pawns Off the Blame
Yesterday, Jerome Powell gave a speech at the Brookings Institute.
The Q&A then ended on an interesting housing question and Powell’s answer.
“Coming out of the pandemic, rates were very low, people wanted to buy houses, they wanted to get out of the cities and buy houses in the suburbs because of Covid. And so you really had a housing bubble, … very unsustainable levels and overheating. Now the housing market is going through the other side of that,” said Powell.
Rather than admit any part of the blame, Powell tried to lay the blame on regulation. “It’s hard to get zoning, hard to get housing built in sufficient quantity to meet the public’s demand,” said Powell.
Although zoning plays a part, cheap money and QE all the way to March of 22 is the big culprit.
For more on Powell’s speech, please see A Hopium Stock Market Rally on Jerome Powell’s Inflation Progress Report.
This post originated at MishTalk.Com.
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Mish
the banks were unaffected, increasing by $3.6 trillion dollars).
“The term credit crunch had its origins in the unusually
tight credit conditions that prevailed in the U.S. in the late summer of 1966,
when reports of borrowers unable to obtain credit at any price were
commonplace. Prior to 1966, the postwar U.S. experienced 3 periods of tight
credit; the spring of 1953; the fall of 1957; and the last third of 1959. These
periods were called “credit squeezes” or “credit pinches”.
Sidney Homer and Henry Kaufman, economists at Salomon
Brothers in the 1960’s, coined the term “crunch” to describe how the 1966
episode differed from those in the 1950’s. Although Homer and Kaufman did not
formally define a crunch, Homer (1966) offered the following explanation:
The words squeeze or pinch have gentle connotations. The
prehensile male sometimes “squeezes” or “pinches”, with the most affectionate
intentions. No bruises need result, no pain need be inflicted. A “crunch” is
different. It is painful by definition, and it can even break bones.”
See: “Identifying Credit Crunches” by Raymond E. Owens and
Stacey L. Schreft. Federal Reserve Bank of Richmond, March 1993.