Case-Shiller Index Starts to Register Home Price Bounce

increase in San Diego home prices has begun to show up in the
(always lagging) Case-Shiller index.

Between January, the month for which I last updated the C-S data,
and April, the aggregate San Diego home price index has risen by 2.0
percent. This increase was enjoyed entirely by the high- and
mid-priced tiers, up 2.4 percent and 2.5 percent respectively.
The low tier actually declined by .7 percent, although that entire
decline took place in February and the low tier has risen since
then.

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Jazzman

11 years ago

Can you realistically talk of
Can you realistically talk of home price appreciation without any mention low rates and low inventory? It reminds of that Russian joke. Carter and Brezhnev raced a 100 meter sprint. Carter won, but Pravda reported Brezhnev came second and Carter second to last. Eternally grateful for all the hard work you put into this blog Rich, but couldn’t resist it 🙂

Rich Toscano

11 years ago

Reply to Jazzman

Jazzman wrote:Can you
[quote=Jazzman]Can you realistically talk of home price appreciation without any mention low rates and low inventory? It reminds of that Russian joke. Carter and Brezhnev raced a 100 meter sprint. Carter won, but Pravda reported Brezhnev came second and Carter second to last. Eternally grateful for all the hard work you put into this blog Rich, but couldn’t resist it :)[/quote]

I did mention low inventory in the article. As to rates — while this line of thinking is now out of vogue, I remain convinced that they are going much, much higher in the future, and that this will negatively impact housing. But I’ve been over that topic again and again; I don’t feel the need to rehash it in every blog post.

bearishgurl

11 years ago

Don’t you mean the low and
Don’t you mean the low and mid-priced tiers, or am I not reading the graph correctly?

Rich Toscano

11 years ago

Reply to bearishgurl

bearishgurl wrote:Don’t you
[quote=bearishgurl]Don’t you mean the low and mid-priced tiers, or am I not reading the graph correctly?[/quote]

That second thing.

HenryPP

11 years ago

Rich, I know you said you
Rich, I know you said you don’t want to rehash the interest rate thing again, but hopefully this is a thoughtful question: When you say you expect interest rates to go much higher in the future, are you talking about government interest rates, or consumer and mortgage interest rates (i.e. that the spread between government rates and mortgage rates would increase).

If the former, I don’t see how that is possible. If interest rates on government bonds increase significantly, government finances would implode because government debts and obligations are so high that no realistic increase in taxes could possibly pay the interest on the government debt in a high rate environment. So the Fed would step in to buy down the rates, as they’ve shown themselves willing and able to do on several occasions in the last few years.

This game probably eventually collapses, but that might be a decade or more in the future. I won’t say the US is quite following Japan because the economies are so different, but I will say that a lot of people have lost a lot of money betting on a rise in Japanese interest rates and I think people might be surprised how long American rates can stay low.

Thanks.

spdrun

11 years ago

Reply to HenryPP

If we run into Japanese type
If we run into Japanese type deflation despite low interest rates and Bennie-boy giving his all, that would be BRILLIANT.

Rich Toscano

11 years ago

Reply to HenryPP

HenryPP wrote:Rich, I know
[quote=HenryPP]Rich, I know you said you don’t want to rehash the interest rate thing again[/quote]

I just meant to say that I didn’t want to revisit that potential threat to the market in each and every data update, because doing so would kind of get old. I’m not at all averse to discussing the topic (in fact I think it’s fascinating (if exasperating!))

[quote=HenryPP]When you say you expect interest rates to go much higher in the future, are you talking about government interest rates, or consumer and mortgage interest rates (i.e. that the spread between government rates and mortgage rates would increase).[/quote]

The former.

[quote=HenryPP]If the former, I don’t see how that is possible. If interest rates on government bonds increase significantly, government finances would implode because government debts and obligations are so high that no realistic increase in taxes could possibly pay the interest on the government debt in a high rate environment.[/quote]

Yes, well that’s the problem, isn’t it? 🙂

[quote=HenryPP]So the Fed would step in to buy down the rates, as they’ve shown themselves willing and able to do on several occasions in the last few years.[/quote]

I think that’s very likely, but there is no guarantee at all that that will actually work. Prior monetizations happened in an environment of very low rates/inflation and fear of outright deflation. Monetizing during a period of rising rates and potential inflationary pressure could turn out very differently. But I agree, they will probably give it a try. And maybe it will even work (by “work” I mean the debt problem will be dealt with more on the inflation/currency side than the bond market side, but without the former getting completely out of control).

[quote=HenryPP]This game probably eventually collapses, but that might be a decade or more in the future. I won’t say the US is quite following Japan because the economies are so different, but I will say that a lot of people have lost a lot of money betting on a rise in Japanese interest rates and I think people might be surprised how long American rates can stay low.
[/quote]

I’m not a fan of the Japan comparison (not that you are really making it) because of two huge differences: 1. we are printing boatloads of money, and despite reputation, Japan really never did that to any great degree and 2. their debt is internally financed. BTW: due to #1, our REAL rates are already lower than they ever got in Japan, so in that respect we’ve already passed them in lowness of yields.

As far as timing, you may be right. Or not right. Nobody knows when this adjustment will happen, as is the case with complex and chaotic systems that are driven so largely by crowd psychology. People who insist that it’s imminent, or that it’s not going to happen for 10 years, are deluding themselves in my opinion. Nobody knows. But, I am very, very convinced that it will at some point happen. (“It” refers to our debt chickens coming home to roost in some manner, via higher rates or the monetization — and consequences thereof — of holding rates down artificially).

Rich