OCTOBER 3, 2022 – My June 14th post about Step 2 occurring said it would be easy to look back in 3 months and see that the housing market had peaked. Sure enough, 3 months later everyone can now see a top is in place and a correction has been well underway.
Step 3 is an acceleration in the slowdown of price appreciation. A summary of indicators follows.
The American Enterprise Institute’s (AEI) Home Price Appreciation (HPA) Index peaked at 17.0% in March and declined to 11.3% in August. AEI projects it will decline to 4%-6% by December.
The S&P Corelogic Case-Shiller House Price Index fell 0.4% on a month-over-month basis in July for the first time in 10 years. On a year-over-year basis, the increase in home prices decelerated by the most in the index’s history, said Craig J. Lazzara, managing director at S&P DJI.
Lastly, the FHFA House Price Index dropped 0.6% in July vs. June.
These are early signs that Step 4 will be upon us sooner than later. That is when the annual change goes from appreciation to depreciation. With mortgage rates soaring towards 7% the decline in home prices is more certain than ever.
What will baffle people is the continued low supply of available housing combined with prices declining. As I have long said, you don’t have to buy, but often you do have to sell. With a lack of buyers, sellers will continue to lower prices. In September, the number of households likely to buy a house in the next 6 months fell to its lowest level since 2010.
Shalom,
The Mann