Is The Long Descent of Home Prices Finally Over?

The FHFA and Case Shiller House Price Indices (HPIs), produced simultaneously once per month, are two of the most formal ways to monitor home price growth. The results of January’s update, released last Tuesday, are conflicting.

Price appreciation continues to fall quickly in annual terms. It would be hard for the annual pace to avoid falling into a downtrend in the upcoming months, given price movements over the previous 12 months.

In January, the FHFA’s monthly HPI returned to a positive reading. Although Case Shiller fell by 0.4%, this is an improvement over the 0.5% decline in December. Both have recovered significantly from their most significant late-year reductions. Currently, pricing patterns are more resilient than anticipated, especially considering the more extensive FHFA data set.

The Labor Department’s jobs report and the Consumer Price Index (CPI) from the Census Bureau will be the two major releases that will impact the mood most. Rates have stabilized for now without increasing to the higher range expected in 2022. A lack of more drama would push rates back in the opposite way, especially if the economy continues to remain robust. Any additional bank failures would likely put downward pressure on rates.

Redfin: Mixed Opening to the Spring Home Season

Based on two reports from Redfin, the spring home buying/selling season may be hindered by dropping home prices and the traditional suspect: a lack of housing availability.

While the IT sector struggles and mortgage rates remain high, Redfin revealed that home markets in tech hubs and pandemic migratory hotspots are cooling more quickly than in other U.S. regions. The U.S. housing market has begun to recover from its pandemic-era boom, and Austin, Texas, Seattle, Phoenix, Tacoma, Washington, and Denver have all experienced the fastest cooling. The top 10 cities are Las Vegas, Stockton, San Jose, Sacramento, and Oakland, California.

According to the Redfin analysis, several factors contribute to the rapid cooling of housing markets in tech hubs, including volatile tech stocks, tech layoffs, a lack of available inventory, unsustainable pandemic home-price increases, high mortgage rates, and still-high home prices. Although home prices are declining in the Bay Area and Seattle, they are still high, partly due to a lack of available homes.

In a different research, Redfin claimed that a lack of supply causes buyers competition for the few available properties.

Despite rates being high and demand being low compared to last year, Redfin Chief Economist Daryl Fairweather noted that homebuying activity is increasing because so few options are available. In the first two weeks after going on the market, most homes under contract received an accepted offer, the highest percentage since June. This is partially due to seasonality, as the market often picks up speed as springtime approaches. But, a scarcity of inventory is driving homes to sell faster than anticipated while buyers are coping with 6% or more rates.

Against All Odds, March Consumer Confidence Still Up 

As the Conference Board, New York reported, consumers seemed undeterred despite an eventful few weeks, including many bank failures, ongoing inflation, a small housing market, and the possibility of more unemployment.

The Consumer Confidence Index for March increased to 104.2 from 103.4 in February. Based on consumers’ assessments of the current state of the economy and labor markets, the Current Situation Index dropped from 153.0 last month to 151.1 this month. The Expectations Index, which measures consumers’ short-term expectations for economic, business, and labor market conditions, increased from 70.4 in February to 73.0 in March (a slight upward revision). The Expectations Index, which frequently heralds a recession within the next year, has been below 80 for 12 of the previous 13 months, or since February 2022.

“Consumers may not love the present conditions, but a slightly more upbeat take on where things are headed was enough to give overall confidence a nudge in the right direction in March,” said Tim Quinlan, Economist with Wells Fargo Economics, Charlotte, N.C.

Source:

Vaimberg, Ron. “Weekly Newsletter – January 6, 2023.” Ron Vaimberg International, Ron Vaimberg, 6 Jan. 2023, https://rvionline.thinkific.com/courses/take/rvi-weekly-newsletter/texts/41523497-weekly-newsletter-january-6-2023.