America’s Most Splendid Housing Bubbles, August Update: The First Price Drops Appear, All in the West

The Case-Shiller index, which lags the reality on the ground by 4-6 months, is beginning to pick up on price declines in Seattle, San Francisco, San Diego, Los Angeles, Denver and Portland.

By Wolf Richter for WOLF STREET.

The housing market is navel-gazing as many buyers have evaporated at current prices and mortgage rates. They are still there, but they are one plot lower, and many sellers have not yet realized this, although some have started to reduce their asking prices, but not enough, and the volume of transactions has fallen.

The volume of existing home sales fell 20% from a year ago in the United States, 31% in California and 41% in San Diego. Median prices in the West have started to decline and in the San Francisco Bay Area they have fallen below levels of a year ago, including 8% in San Francisco. Sales of New homes plunged nearly 30% year-over-year in the US and 50% in the West as new home supply soared to 11 months, the highest since the peak of Housing Bust 1 And the big institutional buyers have started pulling out of that market because they don’t want to pay too much. It’s been going on for months.

But today, the S&P CoreLogic Case-Shiller home price index, which is 4-6 months behind the reality on the ground, finally recorded the first month-over-month price declines. – all in the West: the metros of Seattle, San Francisco, San Diego, Los Angeles, Denver and Portland.

Today’s release of the Case-Shiller index was for ‘June’, which is the three-month average of closed home sales that were registered in public registers in April, May and June, transactions concluded a few weeks to a few months earlier, approximately from March to May.

In mid-April, the average 30-year fixed mortgage rate crossed the 5% mark and has remained above 5% ever since. So let’s go.

The most splendid real estate bubbles where prices have fallen.

Home prices in Seattle’s metro fell 1.9% in “June” (moving average over three months of April, May and June) from “May”, erasing in one month the gains of the two previous months plus some. This was the first month-over-month decline since October 2019, after a totally ridiculous spike. It narrowed the year-on-year peak to 9.3% from 27% a few months earlier.

Home prices in the San Francisco Bay Area fell 1.3% in “June” from May, below the April level, and the first month-over-month decline since June 2020, erasing the gains of the previous two months in one month. That reduced the year-over-year peak to 16.1%, down from more than 24% in previous months.

For the Case Shiller index, the metro includes the five counties covering San Francisco, part of Silicon Valley, part of the East Bay and part of the North Bay.

Home prices in metro San Diego fell 0.7% in “June,” the first month-over-month decline since October 2019, after a ridiculous spike. The index fell below April’s level, erasing the gains of more than two months in one month.

The 0.7% decline reduced the year-over-year gain to 21.6%, from gains of nearly 30% a few months ago.

The index value of 425 for San Diego means that home prices have risen 325% since January 2000, when the index was pegged at 100, despite the fall in the middle (the inflation of CPI stood at 75% over the same period).

Home prices in metro Los Angeles fell 0.4% in June compared to May, reducing the year-over-year price spike to +19.4%.

Home prices in metro Denver fell 0.1% in June compared to May, reducing the year-over-year gain to 19.3%:

Home prices in Portland’s metro fell 0.1% in June compared to May, which reduced the year-over-year gain to 14.7%. The month-over-month decline, the first since October 2019, is too small to mark on this 20-year chart:

Real estate price inflation. The Case-Shiller index uses the “sell pairs” method. Sales for the current month are compared to those of the same homes sold previously. Price variations within each sales pair are incorporated into the metro index and adjustments are made for home improvement (methodology). In other words, the index tracks the change in dollars it took to buy the same house over time, making it a measure of house price inflation.

The most splendid real estate bubbles where prices have “decelerated” or stagnated.

Miami Metro: +2.3% for the month, “decelerating” from monthly gains of around 3.5% in previous months. This reduced year-over-year gains to +33% from +34% the previous month, ridiculous mania, all of it.

Tampa Metro: +2.2% for the month, down from 3.7% earlier this year. This reduced the year-over-year peak to 35.0%, from 36% the previous month. Mind blowing crazy.

Phoenix Metro: +1.0% for the month, decelerating from +2.5% in April and +3.0% earlier in the year. This reduced the year-over-year peak to +26.6% from +32% earlier this year:

Boston Subway: +0.6% for the month, down from 1.9% the previous month and +2.8% earlier this year. This reduced the year-over-year gain a bit to 14.9%:

Washington DC Metro: +0.0% for the month, unchanged, decelerating from 2.9% earlier this year. This reduced the year-over-year gain to +10.8%:

Las Vegas Metro: +1.5% for the month, decelerating from +2.1% month-on-month and over +3% earlier this year. This reduced the year-over-year gain to +25.1%:

Dallas Metro: +2.6% for the month, same as the previous month, but decelerating from more than +4% earlier this year. The year-over-year gain remained at +30.8%:

new york subway, the massive New York commuter market: +1.1% for the month, down from 1.6% the previous month. The year-over-year gain of +14.6% has remained roughly unchanged for three months.

With its index value of 276, the New York metro has experienced housing price inflation of 176% 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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