America’s Most Splendid Housing Bubbles, July Update: Reducing Insane Price Spikes
First signs that the juice is coming out, several months later.
By Wolf Richter for WOLF STREET.
Signs are now everywhere that the crazy housing market is turning the corner. Earlier today, the Census Bureau released chilling data on new home sales and prices, which plunged in June as inventories hit their highest level since 2008. The National Association of Realtors reported last week existing home sales in June also fell, even as inventories jumped. The trio of national housing reports was rounded out today by the S&P CoreLogic Case-Shiller Home Price Index.
All real estate indices are lagging behind the reality on the ground. But the S&P CoreLogic Case-Shiller index lags the most, although it is perhaps the most reliable index for real house price changes.
Today’s release of the Case-Shiller Index was for ‘May’, which is the three-month average of closed home sales that were registered in public registers in March, April and May, transactions concluded a few weeks earlier, roughly in February, March and April.
In early February, mortgage rates were 3.5%. In mid-April, they broke through the 5% mark – roughly the range that applied to transactions in today’s “May” period of the Case-Shiller home price index ( green box):
But the first signs of a slowdown are being felt in the current S&P CoreLogic Case-Shiller home price index, with lower month-over-month price gains: in “May” (average of March , April and May), the index gained 1.5% from “April”, down from gains of 2.3% and 2.6% in the previous two months.
In some markets, the month-over-month price gains were still huge. In others, they were much lower: +0.5% in Seattle, +0.6% in San Diego, +0.9% in San Francisco, with house prices stable.
The year-over-year gain in the national Case-Shiller index slowed to 19.7%, after being above 20% in the previous three months.
San Diego Metro: Single-family home prices rose 0.6% in “May” from the previous month, which was only a pale imitation of the 4.5% jump in “February” and the 3.7% jump % in March”. In the chart, you can barely see today’s small uptick from previous months’ highs.
That 0.6% gain reduced the year-over-year gain to 25.6%, which is still ridiculous, but down from +29% a few months earlier.
The index value of 428 for San Diego means that home prices have risen 328% since January 2000, when the index was pegged at 100, despite the fall in the middle (the inflation of the CPI stood at 75% over the same period). That crowns San Diego as the most splendid real estate bubble on this list, followed by Los Angeles and Seattle.
Los Angeles Subway: +1.1% in May vs. April, still huge, but down from jumps of over 3% in Feb and March. This reduced the year-over-year spike to +21.7%.
The index value of 423 indicates that housing prices have jumped 323% since January 2000, making Metro Los Angeles the second most splendid real estate bubble on this list:
Seattle Metro: +0.5% for the month, compared to the peak of 5.6% in March and the peak of 4.4% in February. This reduced the year-over-year peak to 23.4%, from 26.1% in April and 27.7% in March:
Not a miracle but the inflation of real estate prices. The Case-Shiller index uses the “sell pairs” method. Sales for the current month are compared to those of the same homes sold previously. For example, the San Francisco Bay Area, made up of five counties, has between 3,000 and 5,500 of these “sales pairs” each month, depending on the season. Price changes within each pair of sales are then incorporated into the metro index, and adjustments are made for home improvement (methodology). This way, the index tracks the change in dollars it took to buy the same house over time, making it a measure of house price inflation.
San Francisco Bay Area (five counties covering San Francisco, part of Silicon Valley, part of East Bay and part of North Bay): +0.9% for the month, after gains of +2.1%, + 4.3% and +3.7% in the previous months. This reduced the year-over-year peak to +20.9%, from +22.9% and +24.1% in the previous two months:
Miami Metro: + 2.8% for the month, against + 3.4% and + 3.6% the two previous months. But no reduction, in terms of year-on-year: +34.0%, compared to +33.3% the previous month, the craziest year-on-year peak in the data:
Tampa Metro: +2.8% for the month, down from peaks of 3.0% and 3.7% in previous months. Year-on-year: +36.1%, compared to +33.3% in April, a new high in the data:
Phoenix Metro: +2.5% over the month, as in April, and down from +3.0% in March. This reduced the year-over-year peak to +29.7%, the first month since June 2021 below +30%!
Portland Metro: +0.9% over the month, against +2.2% and +2.9% in the previous months. This reduced the year-over-year gain to +17.4%, from +19.1% in April:
Boston Subway: +1.9% over the month, against +2.8% and +2.6% in the previous months. Year-on-year, the index jumped 15.7%, from 15.1% in April:
Washington DC Metro: +1.1% for the month, compared to +1.9% and +2.9% over the previous two months. This reduced the year-over-year gain to +12.2% from +12.7% in April:
Denver Metro: +1.1% for the month, compared to +2.5% and +4.5% over the previous two months. This reduced the year-over-year gain to +22.2% from +23.6% in April:
Las Vegas Metro: +2.1% over the month, against +2.3% and +3.1% in the previous months. This reduced the year-over-year gain to +27.4%, from +28.4% in April:
Dallas Metro: +2.6% over the month, against +3.2% and +4.3% in the previous months; keeping the year-over-year gain roughly flat at +30.8%:
new york subway, the vast New York commuter distance market: +1.6% for the month, compared to +2.0% in April. Year over year, the index gained 14.5%, about the same as in April.
With its index value of 272, the New York metro has experienced housing price inflation of 172% since January 2000. The remaining cities of the Case-Shiller index at 20 cities (Chicago, Charlotte, Minneapolis, Atlanta , Detroit and Cleveland) have experienced less house price inflation and do not qualify for this illustrious list.
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