Mar 2019 housing data: further strengthening (but real prices negative y-o-y)

Last month I introduced a chart of the year-over-year price change,
and I belatedly realized that I should have included an inflation
adjustment. That is after all the more relevant figure — if your
house’s price went up 1%, but inflation rose by 2%, your house is
now worth less than it was in purchasing power terms, which what
actually matters.

And on that note, the real “home price” (actually 3-month average of
the single family price per square foot) did indeed go
ever-so-slightly negative last month. This marks the first time in
negative territory since 2012:

Weep not for the market, though, as it has shown some resilience of
late, with months of inventory declining:

… and prices bouncing a bit:

Here are price changes and (inverted) months of inventory
overlaid… it’s amazing how well this relationship has held up,
including during the recent pretty violent plunge and snapback (only
some of which was seasonal):

I think it’s likely that the recovery is largely owed to the plunge
in mortgage rates:

My brief defense of this is pretty straightforward: rates went up
hard and fast into late 2018, and the market weakened notably
(becoming the weakest since the boom began). Then rates dropped and
housing started to bounce back. Like I said, pretty straightforward!

The problem for the housing bulls is that rates dropped so hard
because people downgraded their forecast for economic growth. A weak
economy is not in itself good for housing, obviously. But a strong
economy would likely see a resumption of Fed tightening and higher
rates. So this current housing mini-rebound seems to require a very
delicate balance that  is unlikely, in my opinion, to persist
for too long. But we’ll see.

More graphs below…