via mhanson:
Redfin reported last week that house prices were down 0.1% y/y in March, the ‘first such decline since 2012’.
BUT, that sounds better than it really is…
Redfin has been reporting shrinking HPA for about a year now (See Item 1). Last month it finally “turned negative”, an important distinction.
Redfin’s “first decline since 2012” marker is not a great analog, as mega-Bubble 1.0 HPA actually began contracting in early 2006, “turned negative” in early 2007 and bottomed in early 2009. From there, house prices stayed in the red on a y/y basis until 2012 when they “turned green” again. Of course, the month before they turned green they were still red, which is what Redfin is using as a marker. (See Item 2)
A more apt marker looking at this directionally and trend-wise would be 2007, which was the first time house prices “turned negative” since 1990.
Further, Redfin reported that higher-end house sales in the bubble regions are very weak compared to lower end house sales, which are outperforming. This could portend a period of house price compression on deck…higher end properties decrease in value while lower end remain flat or increase, which can wreak-havoc with popular house price surveys.
BOTTOM LINE: While the woefully inadequate Case-Shiller remains the definitive source for house prices the monthly housing report and data Redfin publishes should directionally lead the CS by at least 4 months meaning Case-Shiller price gains will continue to weaken into year end and potentially go red. (See Item 3)
IT’S IMPORTANT TO NOTE that this doesn’t mean I am Armageddon bearish like I was leading into 2007. In fact, I don’t know what red y/y national house prices means in the context of an historical $16 TRILLION in home equity. Remember, leading into 2007 mortgage lenders found new and exotic ways each year to allow homeowners to extract every penny of equity as prices rose to Bubble highs. This time around, however, houses have been a forced savings account and Homeowner’s at large have never been more wealthy, at least on paper. I just don’t believe you can have a massive consumer-led economic implosion with so much accumulated wealth, a great jobs market and high confidence. Rather, I think, we could be headed into a period reminiscent of 2003 to 2007…lenders, investors and .Gov figure out next-gen ways of allowing homeowners to extract every ounce of equity, which many homeowners will gladly do. This isn’t necessarily house-price bullish but it’s macro economically bullish for sure.
Mark
DATA BELOW. Note, ITEM 3 is really is the conclusion.
ITEM 1) Redfin reported that national House Prices “Went Negative” in March for first time since 2012. But, in 2012 they were trending higher and turning positive, so this analog is faulty.
ITEM 2) The lagging Case Shiller is headed lower red based on Redfin data and as shown below for the first time since 2007.
ITEM 3) Redfin prices with Case Shiller overlaid shows a clear directional correlation. Whether CS follows Redfin red is the question.
REDFIN ARTCILE
Redfin: Home Sales Surge in Florida as California Markets See Double-Digit Annual Declines
Redfin: Home Sales Surge in Florida as California Markets See Double-Digit Annual Declines
MBA NewsLink Staff
April 23, 2019
Redfin, Seattle, reported U.S. home sale prices as essentially flat in March, ticking down by just 0.1 percent annually to a median of $295,100, the first year-over-year price decrease on record since February 2012, when the median home sale price bottomed out at $171,600.
Nine of the 85 largest metro areas Redfin tracks saw a year-over-year decline in their median price, including a 13 percent drop in San Jose and a 1 percent dip in San Francisco. These and other expensive West Coast markets, including Los Angeles, Orange County and Seattle, posted double-digit year-over-year declines in the number of homes sold while several large affordable markets on the East Coast saw big annual sales gains.
Redfin said as housing market activity shifted from more to less expensive places, the national median price shifted to reflect the homes that sold last month.
“Homebuyers have backed off in West Coast metros where home prices have risen far out of their budgets,” said Redfin chief economist Daryl Fairweather. “The opposite is happening in more affordable metros where buyers are eager to buy now to take advantage of low mortgage rates. In California, where the tax burden is high, some people are finding they have to move out of state to afford to buy a home. As a result, home sales are down in metros throughout the state.”
The report said though home sales increased by 2 percent overall, variations were wide among metro areas. Homes sold fell in 37 of the 85 largest metro areas that Redfin tracks, while 24 metro areas saw double-digit increases in home sales compared to a year earlier. On average, the metro areas that saw the biggest declines in home sales were more than 2.5 times as expensive as the metro areas where sales surged. The cheapest of the 10 metro areas where sales declined (Fresno, $275,000) was still more expensive than eight of the top 10 metros where sales surged.
“Salt Lake City and Las Vegas experienced rapid home price growth in 2017 and 2018,” Fairweather said. “Even though these metros are still affordable to Californians, home sales are likely down because it has become harder for locals to afford to buy homes.”
Redfin reported homes for sale at the end of the month rose by 3.6 percent from a year earlier in March. The number of homes newly listed for sale fell 2.8 percent from a year ago. Home-selling speeds were largely unchanged from a year earlier nationally, increasing just one day to a median of 49 days on market.
The report said 20 percent of homes sold above the list price in March, down from 24.5 percent a year ago. Meanwhile 22.5 percent of homes on the market in March had a price drop, up from March 2018’s share of 20.2 percent.