The Case-Shiller HPI for November (which includes home sales from September, October, and November) took a veritable beating. Prices for the high tier held up best, as usual, falling by 1.8% from the prior month. But the middle tier dropped by 3.9% and the low tier by 4.8% in a single month — yikes!
I thought the huge drops seen recently in the size-adjusted median were at least partially due to shifts in the composition of what buyers were buying (i.e., more cheap homes selling than before). But the latest HPI release, which measures repeat same-home sales and thus can’t be distorted by changes in what’s selling, indicates otherwise. The abrupt price drops appear to be the real deal.
As a matter of fact, my quick and dirty Case-Shiller predictor actually underestimated the drop. As you may recall from the December data rodeo, I thought that the 3-month average of the detached size-adjusted median might give us a rough idea of where the HPI was headed. To my surprise, given the suspected composition changes per the above paragraph, the HPI actually fared worse than predicted. The 3-month moving average of the detached size-adjusted median (I need to come up with a shorter name — let’s just call it the "HPI predictor" until I think of something better) fell by 2.4% in November, while the November HPI actually ended up down 3.4%.
The new predicted HPI is below — this will be updated for January upon the occasion of the next data rodeo:
Alright, I think we’ve established that the HPI has dropped a lot. Here are some more graphs. First, the long-term version. As always, this shows that the high tier’s resilience has more to do with the fact that it never got so overvalued as the other tiers than anything else. It simply doesn’t have as far to fall.
An here are the since-the-peak graph and the long-term graph adjusted for CPI inflation (note on the former that the inflation-adjusted peak is of course earlier than the nominal peak):
Not that this is any big news, but the decline has really picked up the pace. To put it in perspective, as of November the HPI was falling at an annualized rate of over 40%. (Not that I expect this rate to continue all year, this being the weak season and all, but still.) Or, home prices fell more in a single month than the permabulls thought they’d fall ever. Or, if you were to stack all the home equity dollars lost by the average household in November, you would have a stack, like, several feet high or something. You get the idea.