The Most Splendid Housing Bubbles in America Deflate
The Most Splendid Housing Bubbles in America Deflate by Wolf Richter – Wolf Street
Seattle home prices drop at fastest pace since Housing Bust 1. Feeble declines in San Francisco, Denver, Portland, etc. Flat prices in others. Condo prices in NY City suddenly jump.
Single-family house prices in the US, according to the S&P CoreLogic Case-Shiller National Home Price Index, were essentially flat on a month-to-month basis in September, and rose 5.5% compared to a year ago (not seasonally-adjusted). This year-over-year growth rate is below 6% for the second month in row, after having been above 6% all year. This leaves the index 11.5% above the July 2006 peak of “Housing Bubble 1” in this millennium, which came to be called “bubble” and “unsustainable” only after it had begun to implode during “Housing Bust 1”:
The index is a measure of inflation — not of consumer price inflation but of asset price inflation, specifically house-price inflation. It shows to what extent the dollar is losing purchasing power with regards to buying the same house over time.
The fundamentals of the hottest housing markets around the country have been weakening for months, with declining sales and rising inventories. On the West Coast, this inflection point occurred in July. Prices in those markets, as tracked by the Case-Shiller Index, are gradually reflecting the new reality. But “gradually” is not the right word for formerly piping-hot Seattle, where prices are now dropping at the sharpest rate since Housing Bust 1.
So here are the most splendid housing bubbles in major metro areas in the US:
House prices in the Seattle metro dropped 1.3% in September from prior month, after having dropped 1.6% in August, and 0.5% in July, according to the Case-Shiller Home Price Index. Over those three months, the index dropped 3.5%, the sharpest such decline since December 2011, during Housing Bust 1. So home prices are beginning to unwind a historic spike. The index is now below where it had been in April. This confirms that the inflection point — when the direction changes — was in July and that conditions have deteriorated since.