Home prices drop 2nd month in a row

Home-Price Growth Slowed in August

Economists expect price growth to continue to decelerate this year

by Nicole Friedman, The Wall Street Journal, 10/25/2022

Home-price growth decelerated in August as rising mortgage rates weighed on home-buying demand.

The S&P CoreLogic Case-Shiller National Home Price Index, which measures average home prices in major metropolitan areas across the nation, rose 13% in the year that ended in August, down from a 15.6% annual rate the prior month.

The index fell 1.1% in August from July, the second straight month-over-month decline…[end quote]

With mortgage rates rising so fast, it’s not surprising that home sales and housing starts have been falling. Affordability is dropping.

Regardless of home prices, rents are still popping.

Predictably, the markets are hopping up and down on the news since traders anticipate that the Fed will declare victory over inflation and stop raising interest rates. Treasury yields fell and the interest-rate sensitive NAZ popped.

Perhaps the markets don’t realize that the inflation indexes are based on rents, not on home prices. A rising home price is considered a capital gain, not a household expense like rent. Renters are naturally tallied, but homeowners are assigned “rental equivalent” which is the cost of renting an equivalent house. As long as rents are rising the CPI and PCE index will rise even if home prices begin to drop.

Only time will tell how the Fed will react to this news. If the Fed stays on course to raise the fed funds rate 0.75% in November, as expected, the markets will settle down. If the Fed unexpectedly raises the fed funds rate only 0.50% the markets will soar.




A friend of mine my age is a RE lawyer. She is getting a lot of angry people in her midst for the last two months. The deals take a lot longer. Banks are rejecting the deals. That means buyers and agents go about finding lower priced deals. My friend’s workload is much greater and no one is particularly happy. When buying a house that is bad. My friends stress level has soared. Plus when the deal falls through she can not charge for the deal because then RE agents wont work with her. Tough time for her.

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One house in our neighborhood, same floor plan as ours, went off-market about 2 months ago. A second one, same floor plan, dropped from $745,000 to $599,000 in less than a month. Price has been stable for close to 4 weeks now, but also has not sold. I guess they figure a 20% asking price drop is their limit. For perspective, we bought this house 4 years ago for just $395,000. To put it bluntly, prices simply rose too dang high. This drop needed to happen.


Housing starts are a forward looking economic indicator, because builders can decide go/no go before laying out significant capital and obligations.

Housing sales are a backward looking indicator, since it takes time for a house to be constructed once begun. Therefore, I would postulate that housing sales prices are not a reliable indicator; once the house is done a builder may sit on it longer to achieve his price, or he may cut it to move out from beneath the inventory obligation.

[A majority of housing sales are individuals moving out or moving up, and those are discretionary, but some are not, as when a worker is transferred somewhere.]

Rentals are, surprisingly, a rear facing indicator, at least at this point in the cycle. Rents aren’t like apples or auto tires, where the price can move in a day. Rental agreements are generally a year’s duration, so any price increase (and they are nearly always increases) is “pent-up” until renewal time.

It will take a lot of new inventory (including unsold houses) to tip this one down. It will happen, eventually, but [as the WSJ article you posted recently showed] many large property managers are finding they can be more profitable letting their occupancy stats slide while jacking up rents to much higher levels.] Eventually that has to catch up with them, but it may not be for quite a while.

Side note: as a landlord I always found there was more wear and tear and increased costs of managing the property during tenant transition. Scratched floors, things that were broken that the tenant learned to live with, new paint, etc… these were all things that made having “a good tenant” a better decision than jacking up the rent and forcing people out in pursuit of a few extra bucks.


This is talking about a decline in rate of increase of housing, not a drop in home prices as you state in your title.

Frankly it’s nearly impossible to understand what is happening in your market by looking at the national market. Lack of inventory still reigns supreme here, and prices are still going up, though much more slowly.

Recently had a chat with our Realtor about the local market. Consensus is we should anticipate a 4.5% increase in prices in 2023. Note that we are looking to sell, not buy, so a Realtor looking to put pressure on you would say prices are going down and sell now.

IMO the Fed will continue to raise at 0.75% until we consumers buy less and the stock market shows some fear. Yellen has been on the campaign trail spouting some hope about the economy. Look for that to stop after the election is over. Transitory hope.


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Please take note of the details. The year-over-year price continued to rise. But the month-over-month price change was down.

Am not impressed, particularly given from your article: In the Case-Shiller 20-city index, metro areas on the West Coast suffered the biggest month-over-month price declines. Home prices in San Francisco fell 4.3% in August from July, and Seattle prices fell 3.9%. 20 cities used to compile that index, with the West contributing most to the decline. That tells me nothing about what is going on in my small supply constrained city. Local data shows properties still flying off the shelf within 10 days of posting listing, though there are fewer properties getting into bidding wars and going $100K over ask. Our area is somewhat immune to recession, given the diverse industry employers including universities, hospitals, government and defense. We survived 2008 with only a minor decline.

As for a month over month decline of a modest 1.1%, I would need to see data for those two months going back a number of years before I would chalk it up to anything more than seasonality. July is the slowest month around here, and my favorite time to buy as bargains can be had. I guess we will see what next month brings.

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Location, location.

Our area is seeing major price cuts. A property that was listed and was in contract at $1.2 million walking distance from my house fell through in June (when mortgage rates soared) and was sold in September for $900 K.


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Exactly. Real estate is local, not national. These indexes are one of those failures of averages. You can’t really extrapolate the “average” to be representative of all areas.

Know your area. Investors are still buying here because rents are still going up and prices are not terrible compared to other places, though of course the locals think the prices are horrendous.