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
Tag Archives: housing
STEP 2 IN THE HOUSING REVERSAL HAS OCCURRED
JUNE 14, 2022 – It is rare that you see and know a peak is occurring as you speak. Three months or a year down the road it is easy to look back and see when a top occurred. But, while it is going on….that is difficult. Being in the forest makes it tough to see the trees.
There are 4 steps for the housing market (any market for that matter) to go from growth to decline.
Step 1 – Acceleration in appreciation begins to slow down. This occurred 6+ months ago.
Step 2 – This is occurring now. Annual home appreciation in June will be lower than it was in May. We will look back at May-June 2022 and see the rollover in annual appreciation. Essentially, acceleration has turned negative. Better to call it deceleration.
Step 3 – This is the opposite of Step 1. The steep upward slope of accelerating price appreciation now becomes a steep downward slope of slowing price appreciation. This will occur the remainder of 2022 and into 2023.
Step 4 – The final step occurs when the accelerating slow down (think of slamming on the breaks) takes the market from price appreciation into price decline. This seems a far way off. But, I think we might be in for a surprise and see declining home prices quicker than we expect. We shall see.
As an aside, Bitcoin (slightly below $20k) and Ethereum (around $1k) are nearing major lows. The next move should take both to record highs (4x-5x moves from these levels).
Shalom,
The Mann
New AEI dataset: Housing Market Indicators in the 60 largest US metropolitan areas
April 9, 2019 – In my opinion, the AEI provides the most neutral analysis of the housing market. They likely have the most data. Unlike NAR, there is no bias. Below is their major announcement today. I hope you find their reports useful.
Just to be transparent – I am not a member of AEI (not even sure if such exists). I do not contribute to them. I have attended some of their meetings on housing.
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New AEI dataset analyzes the 60 largest US metropolitan areas
Housing markets are inherently local, making them notoriously difficult to analyze due to the lack of reliable data at the local level. A new dataset from the AEI Housing Center, the first in a series of quarterly reports, aims to fill this void by analyzing housing market data for the 60 largest US metropolitan areas, as well as for the nation as a whole. The current dataset looks at housing data from 2018:Q4.
AEI Housing Center Codirector Edward Pinto and Senior Research Analyst Tobias Peter explain “Our goal is to provide the public, media, and decision makers with accurate and reliable metrics to assess the state of their local housing market in near-real time. A well-informed market place and its participants will aid in promoting sustainable homeownership.”
Among the national Housing Market Indicators for 2018:Q4:
- Rate of house price appreciation (HPA): 3.9%
- Mortgage risk index: 11.1%
- Share of buyers of entry level homes: 55%
- Average sale price for entry level homes: $197,000
- Share of new construction sales (compared to all home sales): 11.2%
The Housing Market Indicators for the 60 largest US metropolitan areas, along with all associated data, are available on an interactive website here.
This was made possible by AEI’s new merged property and mortgage financing national dataset, which consists of over 34 million home purchase transactions.
The data are updated quarterly. The next release of Housing Market Indicators, which will analyze housing data for 2019:Q1, is scheduled for May.
Codirector, AEI Center on Housing Markets and Finance
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