Guess what? US home prices are at record highs.
Oh, you already knew that? I was just making sure. Brian Luke was just making sure.
Brian works at S&P Dow Jones. In the index department, where he’s head of commodities and also head of real and digital assets. On Tuesday, he spent his morning penning some perfunctory color to go along with the latest update on the nation’s marquee gauge of house prices.
“For the second consecutive month, we’ve seen our National Index jump at least 1% over its previous [record],” he said. “2024 is closely tracking the strong start observed last year. Heading into summer, the market is at an all-time high.”
He says all that like it’s a good thing. And it is. If you own property. If not, well… there’s always a park bench. But competition’s heating up for those too. Or at least for the good ones, under trees. You might have to fight a schizophrenic heroin addict and a gang of marauding squirrels for a spot in the shade and the best discarded pizza crusts. Bring an aerosol can with a lighter taped to the front of it. And a battle axe.
I jest. Not really, though. Everybody’s screwed. If you don’t own yet, and you’re not making at least $175,000, there’s a non-trivial chance you’re going to end up homeless.
The YoY gain on the 20-city CoreLogic gauge was 7.2% for April, Tuesday’s update showed. Prices have risen on a 12-month basis for 10 straight months. As the figure below shows, the spate of YoY declines (following the historic pandemic run-up) was so fleeting and so shallow as to be meaningless, particularly when you consider that anyone who took out a mortgage during those months was paying the highest financing cost in decades.
Technically, April’s pace was a slight deceleration from the prior two months’ rate, but the gains are essentially unabated.
The national gauge mentioned by Luke rose 6.3% from the same month a year ago. 13 markets are currently sitting at all-time highs.
The data underscores the message from last week’s NAR update, which showed the median existing home price in May hit a record near $420,000.
Good luck to the Fed on the whole shelter inflation thing. Maybe it’s time to listen to the builders and cut rates.
Separately, FHFA’s gauge registered a 6.3% advance for April. “US house prices continue to rise,” Anju Vajja, from FHFA’s research department, said Tuesday. “The appreciation rate slowed in April amid a slight rise in both mortgage rates and housing inventory,” she went on, adding that “the housing market in general began to show some signs of normalization.” I suppose that depends on your definition of “normal.”
It’s worth noting that Redfin’s gauge, which is more timely than the Case-Shiller measures, likewise suggests the pace of price increases is moderating. That index posted a 7.2% increase for May, the same as the 20-city Shiller gauge for April. Annual growth, Lily Katz said, is exhibiting “signs of plateauing.” Dana Anderson last week suggested Americans are now routinely balking at high prices, giving anyone who’s still in the market “more negotiating power for certain homes.”
Redfin data published this week showed renters in America now need to earn more than $66,000 to afford a “typical” apartment. The problem, Katz dryly noted, is that the “typical” renter makes $11,000 less than that.
Prepare to die, squirrel.
Part of me assumes that prices will only go up more dramatically when rates finally do come down, but that just seems too obvious at this point. It’s to the point, buyers who require mortgages may not even be able to get in the game even if prices were flat and rates went down.
Anecdotally, we have seen strong sales in both volume and price in my neighborhood, but I can only assume that the buyers all work at Nvidia given the selling prices.
“Part of me assumes that prices will only go up more dramatically when rates finally do come down, but that just seems too obvious at this point.”
Exactly.
Lower rates can have a large effect on monthly payment on the way down, as they did on the way up. Taking rate from 7% to 6% cuts payment by 11%, from 6% to 5% cuts payment by another 12%, each move increases qualified buyers hence demand . My assumption/guess is that lower rates will also bring more supply to market. No idea which effect wins out.
Data point – in my city, median household income is about $80K, with two bedroom apartments in the range of $1700 to $2200/month excluding the extremes. So median households can afford rents – and we’re considered a rent-burdened place.