Case-Shiller – A surprise in the bottom 3 cities

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Updating these Case-Shiller charts by hand is mind-numbingly boring but I love the charts after I’m done.

Click on graphs to enlarge.

Top 3 Cities

Seattle, Las Vegas and San Francisco appreciated the most from a year ago.

All three cities still have a lot of upward momentum when you look at Zillow’s “Percent of Homes Increasing in Value.”

Bottom 3 Cities

Of the 20 cities in the Case-Shiller Index, the ones with the least housing price appreciation from January 2017 to January 2018 were Chicago, Washington D.C.(!) and Cleveland.

And all three cities are losing momentum fast. Chicago and Washington D.C. are fast approaching only half of homes increasing in value despite a hot national economy and very low unemployment. If the national economy were to slow down unexpectedly, that would be particularly bad for home prices in these three cities.

The Graphs

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4 COMMENTS

  1. Nice work, John, thanks for sharing! On the ground here in San Francisco in Spring 2018, we’re definitely still seeing a strong seller’s market (which of course matches your case-shiller chart here in this post). When we talk to San Francisco buyers, a lot of their motivation to buy at continually high prices comes from the comparatively high rent amounts they would have to pay otherwise (and also a lack of good rentals available). Another motivation is that San Francisco buyers are receiving high prices for their own homes all over Bay Area, so a lot of these buyers are just turning around (right after their own home sale) and spending that money to upgrade to a larger or nicer home.

  2. Great comment, Greg! Thanks for taking the time.

    In 2016 I thought SF might be starting to slow down. It did for a bit but it took off again in 2017.

    Some of it is SF-specific fundamentals but part of it is national. When the national economy is hot, it’s hard for home prices to fall.

    If home prices were to level off in any metro area while the national economy is so strong, that would be a very bad sign. That would suggest that home prices in that metro would likely fall if the national economy stalled.

  3. Good point about the bellwether of leveling off in slower metro areas. Jobs (income) is the key.

    For example, an article this morning in USA Today explained that strong jobs (+ some more reasons) are why buyers are overpaying for homes in the current market, and extending beyond their budget. https://www.usatoday.com/story/money/2018/04/03/hot-housing-market-home-buyers-spending-more-than-expected/479824002/ (“In January, home prices nationally were up an average 6.2% from a year earlier, according to the S&P CoreLogic Case-Shiller home price index. Prices have risen nearly 50% from their 2012 bottom. Supply shortages, combined with a healthy job market that’s fueling demand, are blamed for the recent price run-up.”)

    The article describes another interesting thing too — younger generations (Millennials) tend to overspend more for homes than the next older generation (Gen X). And further, Gen X’ers tend to overspend more on homes than Baby Boomers. Notably, the article didn’t include statistics for the Silent Generation (1925-1945), probably because the generational overspending phenomenon drops off at the Baby Boomer level (but imagine if the Silent Generation were dominating the foreclosure auction market 🙂

  4. Here is a chart today called “Home Buyer’s Dilemma Explained in One Picture”. It compares hourly wages to median new home price, along with the CPI for rentals. The conclusion is that there is a sort of dilemma facing potential buyers, as the author states, “If you do not already own a home it’s getting harder and harder to buy one. Meanwhile, rent outstrips wage growth.”
    https://www.themaven.net/mishtalk/economics/home-buyer-s-dilemma-explained-in-one-picture-aBWUSNhFQEGcplq8E8PDUg/

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