August housing data: inventory tightens up, but prices still drop

Submitted by Rich Toscano on September 8, 2022 - 8:02pm

Home prices appear to have dropped further last month, with the median price per square foot for single family homes down by 4.2% from a month prior. (Insert usual disclaimer about this being a noisy figure and Case-Shiller being a lot more accurate).

Here's a visual:



In inflation-adjusted terms, home prices have just about round-tripped to where they were a year ago:



Real monthly payments are still up 30%+ though! And this doesn't account for the recent surge to the 6% range for rates.



Switching to supply/demand... inventory flattened out (actually even declined slightly), after its recent upward surge:



And pending sales bounced a bit:



...resulting in a decent-sized pullback in months of inventory:



Here's what months of inventory looks like on a longer time scale. We are actually at middle of the road levels for the post-bust era, notwithstanding the violent upward move it took to get here.



This chart is starting to get pretty weird (and I keep having to expand the scale in one direction or another!):



That pullback in months of inventory is a positive sign for the market.... it indicates that supply and demand are getting back into balance at the current price level. I continue to suspect there's more downside than upside risk to prices here, especially as the recent spike up in rates has yet to be absorbed... but the stabilization of inventory suggests a reasonably healthy market at least in the near term.

More graphs below, and if you missed it, I recently updated the valuation graphs.















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Submitted by evolusd on September 9, 2022 - 3:50pm.

Thanks for the update, Rich!

Submitted by JPJones on September 10, 2022 - 8:51pm.

How long till we can officially say the market is in freefall? Asking for a friend.

Submitted by sdrealtor on September 12, 2022 - 12:46pm.

JPJones wrote:
How long till we can officially say the market is in freefall? Asking for a friend.

Too early but you can tell your friend that new listings are in freefall

Submitted by an on September 12, 2022 - 3:42pm.

sdrealtor wrote:
JPJones wrote:
How long till we can officially say the market is in freefall? Asking for a friend.

Too early but you can tell your friend that new listings are in freefall


Yep, you can say it's in freefall now. 10-15% off peak is good enough of a barometer for defining freefall. Maybe freefalling will be transitory... and maybe it won't. We'll find out when it's all over.

Submitted by sdrealtor on September 12, 2022 - 4:38pm.

I feel likes it is kinda leveling off now after taking a quick dip back to pre_Spring prices. There are buyers for good ones priced there. It just doesnt feel like free falling to me right now as that implies accelerating drops. Time will tell

Submitted by jmw on September 12, 2022 - 7:15pm.

Thanks Rich. You going to post your analysis on YouTube any time soon?

These blog posts are similar to:

- the Altos guy https://www.youtube.com/c/AltosResearch

- and the VA loan guy that goes over interest rate charts https://www.youtube.com/c/SmarterSanDiego

Submitted by Rich Toscano on September 12, 2022 - 7:57pm.

jmw wrote:
Thanks Rich. You going to post your analysis on YouTube any time soon?

I have a face for blogs.

Submitted by Pbranding on September 13, 2022 - 9:10am.

sdrealtor wrote:
I feel likes it is kinda leveling off now after taking a quick dip back to pre_Spring prices. There are buyers for good ones priced there. It just doesnt feel like free falling to me right now as that implies accelerating drops. Time will tell

More rate hikes to come… I don’t think the price decreases are done yet.

Submitted by sdrealtor on September 13, 2022 - 10:39am.

Pbranding wrote:
sdrealtor wrote:
I feel likes it is kinda leveling off now after taking a quick dip back to pre_Spring prices. There are buyers for good ones priced there. It just doesnt feel like free falling to me right now as that implies accelerating drops. Time will tell

More rate hikes to come… I don’t think the price decreases are done yet.

Nor do I. What I dont see is free falling. I see continued orderly declines ending this year back where we started 2022. Spring should be steady and Id expect prices to hold until next Summer/Fall where we slip a little more. Then we are done with the drops. At least that is what my crystal ball says at the moment.

The irony is what you are cheering for has already come. It just takes time for the data to catch up. The most recently released Case Shiller data is a 3 month average. Some of those homes went into contract in february. In a few months when we get our C-S for SEptember those will be sales that went into contract May with most in June-August. Only then will you see the real magnitude of the declines thus far and beleive them

Submitted by JPJones on September 13, 2022 - 1:17pm.

sdrealtor wrote:
Pbranding wrote:
sdrealtor wrote:
I feel likes it is kinda leveling off now after taking a quick dip back to pre_Spring prices. There are buyers for good ones priced there. It just doesnt feel like free falling to me right now as that implies accelerating drops. Time will tell

More rate hikes to come… I don’t think the price decreases are done yet.

Nor do I. What I dont see is free falling. I see continued orderly declines ending this year back where we started 2022. Spring should be steady and Id expect prices to hold until next Summer/Fall where we slip a little more. Then we are done with the drops. At least that is what my crystal ball says at the moment.

The irony is what you are cheering for has already come. It just takes time for the data to catch up. The most recently released Case Shiller data is a 3 month average. Some of those homes went into contract in february. In a few months when we get our C-S for SEptember those will be sales that went into contract May with most in June-August. Only then will you see the real magnitude of the declines thus far and beleive them

Also possible we're at terminal velocity as far as how fast the market can react to negative selling conditions. And to clarify, I'm definitely not cheering for this. My eyes are now squarely on the jobs market to see how much pain us wage earners might feel as a consequence. I asked the question here in the winter months what this might look like. I'm getting my answer. Fingers crossed unemployment numbers stay strong.

Submitted by sdrealtor on September 13, 2022 - 1:29pm.

Gotcha and Im just an interested spectator as Ive done a pretty complete job of insulating myself. Id like for things to be more affordable for younger folks and families that have worked hard and done all the right things. There should be rewards for that

Submitted by an on September 13, 2022 - 4:16pm.

Affordability can come in two ways. 2008 style or late 70s style. We'll see which way we follow this time around. I'm betting on closer to the 70s, but time will tell.

Fast food workers will be making $22/hr. soon and it'll keep on going up based on inflation. It wouldn't surprise me if CA would add more minimum wage for other industries as well and tying to inflation. This housing price wouldn't seem too outrageous if most families make minimum of 6 figures.

Submitted by Pbranding on September 13, 2022 - 6:30pm.

Here’s an example of freefall: https://www.zillow.com/homedetails/2901-...

Sold in June for 2.5. Several reductions and still not pending at 2,099,000. Assuming he gets his price that’s at least a 16% decrease in 3 months.

Submitted by an on September 13, 2022 - 8:42pm.

Pbranding wrote:
Here’s an example of freefall: https://www.zillow.com/homedetails/2901-...

Sold in June for 2.5. Several reductions and still not pending at 2,099,000. Assuming he gets his price that’s at least a 16% decrease in 3 months.


4 years ago, it was sold for 1.35m, wonder if we'll get back to 4 years ago price.

Submitted by sdrealtor on September 14, 2022 - 9:28am.

Pbranding wrote:
Here’s an example of freefall: https://www.zillow.com/homedetails/2901-...

Sold in June for 2.5. Several reductions and still not pending at 2,099,000. Assuming he gets his price that’s at least a 16% decrease in 3 months.

Around the corner, i drive by that daily. House was bought by Open Door who over paid for a dated property with substandard yard and neighborhood feeder street. Now trying to get out. Not the best example. But I’ve said over and over we are down 10-15%. Maybe it’s my perspective but i view what happened as a gap down back to where things should’ve been sans the ridiculous Spring we had. Prices that were the result of no inventory and more rates simply aren’t there anymore. In my view a free fall has no bottom and accelerating losses. I’m not seeing that in current price action. Perhaps it’s semantics but it’s how i view it

Submitted by barnaby33 on September 14, 2022 - 2:46pm.

I have a face for blogs.

Ahem, radio...

Submitted by an on September 14, 2022 - 2:55pm.

sdrealtor wrote:
Pbranding wrote:
Here’s an example of freefall: https://www.zillow.com/homedetails/2901-...

Sold in June for 2.5. Several reductions and still not pending at 2,099,000. Assuming he gets his price that’s at least a 16% decrease in 3 months.

Around the corner, i drive by that daily. House was bought by Open Door who over paid for a dated property with substandard yard and neighborhood feeder street. Now trying to get out. Not the best example. But I’ve said over and over we are down 10-15%. Maybe it’s my perspective but i view what happened as a gap down back to where things should’ve been sans the ridiculous Spring we had. Prices that were the result of no inventory and more rates simply aren’t there anymore. In my view a free fall has no bottom and accelerating losses. I’m not seeing that in current price action. Perhaps it’s semantics but it’s how i view it


The owner who sold to Open Door was smart and being in the right place, at the right time, and having the guts to sell. $1m+ profit after 4 years is pretty wild.

Submitted by sdrealtor on September 14, 2022 - 4:20pm.

an wrote:
sdrealtor wrote:
Pbranding wrote:
Here’s an example of freefall: https://www.zillow.com/homedetails/2901-...

Sold in June for 2.5. Several reductions and still not pending at 2,099,000. Assuming he gets his price that’s at least a 16% decrease in 3 months.

Around the corner, i drive by that daily. House was bought by Open Door who over paid for a dated property with substandard yard and neighborhood feeder street. Now trying to get out. Not the best example. But I’ve said over and over we are down 10-15%. Maybe it’s my perspective but i view what happened as a gap down back to where things should’ve been sans the ridiculous Spring we had. Prices that were the result of no inventory and more rates simply aren’t there anymore. In my view a free fall has no bottom and accelerating losses. I’m not seeing that in current price action. Perhaps it’s semantics but it’s how i view it


The owner who sold to Open Door was smart and being in the right place, at the right time, and having the guts to sell. $1m+ profit after 4 years is pretty wild.

Fwiw Open door records their sales at gross prices. They charge a bunch of fees and for that one those fees were around $200k so price was actually more like 2.3m. Still a nice profit

Submitted by sdrealtor on September 14, 2022 - 6:09pm.

an wrote:
Pbranding wrote:
Here’s an example of freefall: https://www.zillow.com/homedetails/2901-...

Sold in June for 2.5. Several reductions and still not pending at 2,099,000. Assuming he gets his price that’s at least a 16% decrease in 3 months.


4 years ago, it was sold for 1.35m, wonder if we'll get back to 4 years ago price.

With all the inflation we’ve had i just don’t see that

Submitted by John S. on September 16, 2022 - 10:05am.

I think the pain is just beginning.

Yesterday was the last purchase of MBSs by The Fed. From here on out (after the settlement delay, which will run to late October), MBSs coming to market will have to find real buyers -- individuals and institutional investors -- who consider quality and price.
https://wolfstreet.com/2022/09/16/the-fe...

And, with inflation hitting services big time, the impetus and ability for The Fed to pivot and lower rates is rapidly evaporating.
https://wolfstreet.com/2022/09/13/servic...

This is becoming the late 1970s -- ugly consumer price increases -- but with a much more massive debt overhang, and an unprecedented asset bubble, behind it.

I see big reductions in credit, and big reductions in asset prices, coming and continuing for some years (or a Jubilee).

This feels like what should have happened in 2008, with The Fed now handcuffed to NOT reinflating asset prices due to the specter of rising consumer prices.

The transition to sanity will be painful, but is long overdue and needed.

Submitted by an on September 16, 2022 - 10:53am.

If this is becoming like the late 70s, then the asset bubble would not matter as much, since massive inflation will eat away at the asset bubble. When people are getting 10-30% raises every year like the late 70s, they can start to be able to afford the current high prices of the asset.

Submitted by John S. on September 18, 2022 - 7:19pm.

Wages did not keep up with inflation in the late '70s. Real wages fell and only stabilized in '82 or so:

https://fred.stlouisfed.org/series/LES12...

Yep, increases in consumer prices -- and asset prices -- always seem to outpace increases in wages and salaries.

Me, I think it is by design.

Submitted by an on September 18, 2022 - 11:39pm.

I didn't say it kept up. But it sure made price from 1975 look dirt cheap in 1980.

Submitted by Ecclesiastes 10.2 on September 19, 2022 - 11:10am.
Submitted by sdrealtor on September 19, 2022 - 2:40pm.

They are over starting the losses. OD charges about 7.5% in fees sometimes more. They record the purchase at the gross amount before subtracting their fees. Often the house resells for less than the recorded purchase price which is what this article reports. That does not mean they lost money. With that said they also have some costs on the sale and are losing on some and certainly not making what they anticipated.

Submitted by Escoguy on September 21, 2022 - 3:24pm.

Where will the roughly 3,000 people go who have listed their homes?

Submitted by John S. on September 27, 2022 - 10:39am.

A bit of gasoline sprayed onto the recently started fire, 30 year mortgage rates pierced the 7.0% threshold this morning, up at 7.08%, now:
https://www.mortgagenewsdaily.com/

Submitted by gzz on October 2, 2022 - 4:00pm.

We are all focused on the impact of rising rates. Certainly a big negative. But rents are still soaring. My dated OB 3/1 went for 4750/mo and I had a line of people around the block interested. Went with a young guy working from home for a bay area tech co who had very high income and could easily afford the place without his roommates rent. He was from an older beach town and I figured he'd understand the quirks of old beach houses better than someone who grew up in a Dallas mcmansion suburb or something like that.

I feel I could have got more like $5700 if I did a quick update. The fridge is 25 years old, the interior and exterior needs a repaint.... but didn't feel like dealing with it as my new place needs some minor upgrades.

High rates for now just push high income potential buyers into the large condo and SFH rental pool.

Submitted by Ecclesiastes 10.2 on October 3, 2022 - 4:50pm.

Home Prices Crash At Fastest Pace Since Lehman Bankruptcy

https://www.zerohedge.com/markets/home-p...

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