US Home Prices Refuse To Cool

US Home Prices Refuse To Cool

The annual pace of US home price appreciation hit a new record in April, according to one key gauge, even as the monthly pace of gains slowed, data out Tuesday showed. A 21.23% YoY increase on the S&P/Case-Shiller 20-city index marked a fresh all-time high (figure below). The prior month's 12-month rise was 21.15%. The national gauge, meanwhile, rose 20.39% on a 12-month basis, marginally cooler than March's pace. Monthly price appreciation decelerated to 1.77% on the 20-city index and
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7 thoughts on “US Home Prices Refuse To Cool

  1. “Maybe it’s time to ban (or severely limit) investor activity”? Really?? And how do you do that….and more importantly, how would that be legal (especially with today’s SCOTUS!)? How do you define it – an individual owns a couple of condos used part time and rented the rest – is that banned? Etc. etc…. And where are future rentals going to come from, if not from investors? Limiting new investments might bring down sales prices, but wouldn’t the resulting (increased) shortage do the opposite for rents?

    Beyond all this – you certainly know your economics well enough (better than me) to know that the RE market has considerable time lags between changes in fundamentals (like mortgage rates!) and effect on prices. And these are APRIL numbers, which represent closings of contracts entered in Mar, Feb – even before (in NM current lag from contract to closing is around 4 months!). So there’s likely very little of the eventual effect of Fed tightening and mortgage rates increasing showing up in these numbers.

    Check back on this in the fall, after the usually busy summer selling season’s closings, and then by year’s end (if you’re looking to move from your island home and buy elsewhere, late fall thru the holidays might be a great time, I suspect).

    1. “Really??”

      Yes, really. Investors are pricing regular people out of the housing market. It’s (long past) time America takes a break from worshipping a mutated version of capitalism to focus on the myriad realities that aren’t going to go away just because those realities are inconvenient for the relative handful of people who still benefit from a system that, frankly, is irredeemable.

      You can’t have a society where 70% of people are serfs. You just can’t. It’ll end badly for everyone. I realize that a large percentage of my readership is 90th to 99th percentile, and my message to you is this: Wake up before it’s too late. People won’t stand for it forever. We have to give people a break. If we don’t, they’ll come take it all back from us eventually.

      Why do you think the US economy was uniquely vulnerable to the pandemic lockdowns? It’s because the entire system runs on coupon-clipping from the bottom 70% (give or take) of society. When those payments get cut off, the whole thing collapses on itself. It’s not sustainable. You want more prosperity, not less of it. Less precarity, not more of it. How this isn’t obvious to everyone is totally beyond me.

  2. Houses are the last major asset class in which middle class Americans still have a large ownership share, and defending that is vitally important for societal reasons (retirement savings, social stability, etc).

    California had a proposed bill that would have applied a much higher tax rate to rental income for large landlords. The details were not ideal IMO (threshold for “large” was too low) but the concept was good.

    1. Yeah, I also appreciate that California is finally tackling NIMBYism in regards to housing policy by actually allowing housing to be built. Unfortunately, it’ll be a long time, if ever, before we overcome the massive housing affordability issues out here though.

      It doesn’t help that prop 13 is untouchable and is a massive wealth transfer from the poor to the rich. If you have a young family, you better hope you’re inheriting a house or win the startup lottery to afford anything out here. If you are fortunate enough to make enough money to buy something, you then get the privilege to subsidize the property taxes of the people who are sitting on years of massive gains and still paying property tax rates from 40 years ago.

      Prop 13 is emblematic of what H is talking about though. I frequently see comments online about how prop 13 helps keep granny in her house and how heirs need it to be able to afford to keep living out here. The reality is that the vast majority of the benefits flow to the wealthiest landowners and their heirs and the prop 13 property tax limits apply to investment properties as well. There are even folks who complain that recently passed prop 19 only exempts a million dollars of property value gains for heirs who choose to live in the house that they inherit, so those poor souls have to pay property taxes on any increase in value above the million dollar exemption or…gasp…have to pay market property tax rates if they don’t use the house as their primary residence. Oh the humanity!

      Oh, and let’s not forget those heirs also benefit from the step-up in basis when they inherit the property, so they only pay taxes on any gains from the time that they actually inherit the property if they choose to sell. That is exactly the type of entitlement that H rightfully decries.

  3. I’ve been involved in the political/advocacy process around housing policy in my city for years. What I’ve seen is that essentially all the proposals, including the ones that get into law, at best result in the building of high priced housing on increasingly highly valued land.

    Doesn’t matter if the land gets rezoned from single-family to quadplex or even 5 story multifamily. The new units are priced at the maximum market price. If it isn’t a $1MM 3000 sf house, it’s a $700K 1500 sf duplex unit, a $2500/mo 1000 sf apartment, etc, and the price/sf ends up being pretty similar. High income and upper middle class income households ($100K/yr on up) get a a little more choice (unless they want a house with a yard, because kids/etc, then they are SOL), lower income households can’t afford the new units (and end up competing harder for the shrinking pool of old and relatively cheaper housing), and the great bulk of the benefit goes to land investors.

    Effectively, higher permitted density makes the land much more valuable and that increase in value extraction for land owners translates to higher cost for developers and higher price for the ultimate buyer/renter. Absent affordability mandates (that actually work; usually they are riddled with loopholes inserted by industry lobbyists) nothing helps the people who actually need help.

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