The median price per square foot for detached homes didn’t budge
between October and November. This fit nicely into the
“flat-to-down” home price thesis I’ve been
advancing in recent months. The 7.4% monthly rise in the condo
median made for quite a poorer fit to my theory, however.
The big move up in the condo price was enough to drag the aggregate
median price per square foot up by 1.8 percent for the month.
That said, the condo series tends to jump all over the place so it’s
never wise to make much of a single-month move there.
The plain vanilla median was actually up for both property types: 1.3%
for detached homes, 8.1% for condos, and 1.9% in aggregate.
Last month sddude (I’ve decided to drop his extraneous u’s in casual
conversation) requested vertical lines on the price charts to better
evaluate seasonal effects. Thanks to a timely Microsloth Office
upgrade and some advice from Pigg AN, I was able to do that this
month. I created a separate chart so that I could start the time
series in January, making it a bit easier to visualize the seasons.
The spring bounce effect is pretty clear here. Even during the
freefall era, the rate of decline slowed a bit (though this is more
obvious on the Case-Shiller chart below).
The official Case-Shiller index was down again in September; the
median-based estimate projects a further fall in the October CS index
but then a flattening in November.
Here’s a calendar-year, vertical-lined look at the CS index since just
after the peak.
Closed sales declined for the month but this is a fairly typical
Pending sales were also down, which is also typical for November, but
the decline in pendings was quite a bit milder than that of closings.
Inventory dropped again after having risen throughout the year until
Months of inventory were ever so slightly up to about 6.3 months.
Aside from inventory at a level that does
portend aggregate price increases in the months ahead, the
market now has rising interest rates to deal with. In the past
month, per Freddie Mac, the average 30 year fixed mortgage rate has
gone from 4.17% to 4.61%. Sub-5% mortgages are still laughably
low, but that’s a fairly abrupt jump in rates. The specter of
higher rates could induce some potential buyers to pull the trigger in
the near term, but to the extent that higher rates last they can only
be a headwind to the market.
I firmly disagree with the idea that there is a one-to-one relationship
between rates and prices, such that if rates increase a certain
percent, prices should be expected to decline by that percent or
anywhere near it. The historical data clearly demonstrates that
there is no such correlation. However, there is no question that
sustained higher rates will reduce demand, all other thing being equal,
just as super-low rates have in recent times boosted housing activity
above what it otherwise would have been.
Anyway, the effect of the rate increase to date remains to be seen, but
even if there is no impact from rates, supply and demand levels imply
further stagnation ahead.