Wednesday, February 6, 2013

Housing price update

The housing market is really heating up, with many areas of the country reporting rising prices and even bidding wars. Mark Perry has lots of details here and here. I offer some charts to complement his:

Based on the chart above, it looks like the best that can be said for housing prices is that they have been relatively flat over the past four years.

But as this chart shows, housing prices as measured by the Radar Logic folks (quite similar to the CoreLogic data Mark uses) are up over 10% in the past year. We haven't seen anything like this for a very over six years.

To better appreciate what is going on, I offer the above chart, which compares the Radar Logic price index in 2011 (orange) to the index in 2012 (white). Instead of following their normal seasonal pattern (in which prices tend to fall from summer through winter), prices last year didn't fall at all. On a seasonally adjusted basis, therefore, prices are up significantly. This is a very important change on the margin.

One of the key characteristics of today's housing market is a shortage of homes for sale. As this chart shows, the inventory of homes for sale is about as low as it's ever been. Presumably, the recent strong price action will convince banks and homeowners who were reluctant to sell at depressed prices to put their properties on the market in the coming months, which are traditionally the strongest for housing sales. If they don't, prices could rise even more.


marcusbalbus said...

why do you applaud a market that rises way out of line with growth and historical trends? this will induce the less prudent to over pay, over lever and buy when they should rent. i suspect the reason is you are addicted to cheerleading no matter what the consequences of the fed induced artificial price pumping. shame on you.

Benjamin Cole said...

It is interesting how quickly this market changed in tenor---remember all the screaming about "unsold inventory" and "shadow supply" etc.

Moreover, i suspect much of the extra supply is in places like Detroit or Florida.

Could be some awesome years ahead for real estate.....

randy said...

The most interesting dynamic in rising home prices is the affect it may have on the middle class. It may free them up to sell houses they couldn't before, making career moves easier, or simply "right sizing"; it will certainly make people feel wealthier. Just as sharply lower home prices were at the root of the great recession, material improvement must be a very important positive.

Unknown said...

it is amazing what manipulated supply and manipulated interest rates can do. I'm suprised so see the believers in free markets cheer this. "Unsold inventory" and "shadow supply" are a fact. The banks are sitting on their supply because they have next to no carrying costs. Deliquancy rates are what? 10% or so still?

Blowing an artifically bubble again...when will we learn? Why do this with a basic necessity like housing? It is going to happen all over again.

MCKibbinUSA said...

Rent-earning real estate is a steal right now -- my advice is to bid low and demand painful concessions from sellers -- insist that the seller throw plenty of extras into the deal -- money is in very short supply along Main Street these days -- now is the time to buy up rental properties before the inventory is gone -- but again, bid very low and demand deep concessions from sellers.