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Home price gains have arguably stabilized above 6% (ar)

Published on March 26, 2024

Gerard MacDonell

This morning’s data from Case Shiller and the FHFA suggest that home price appreciation may be stabilizing at about 6%. This would imply a continued positive contribution to the household sector’s wealth to income ratio and to access to credit. In fairness, that impetus would be greatly reduced from where it was just a couple years ago.

The 12-month change of the FHFA purchase only home price index decelerated from 6.7% in December to 6.3% in January. And the Case Shiller 20-city average quickened from 6.2% in December to 6.6% in January.

The ratio of prices to rents is no longer rising, but it appears to be at a daunting level, especially in the case of the FHFA index, which places a lower weight on higher-end houses. However, the signal from that measure of valuation is not confirmed by evidence of a rising surplus of the housing stock or by a surge of availability of mortgage credit via dubious instruments. Apparently, option ARMs have reappeared, but so far as I know they are not yet a big part of the flow of credit to housing. And at some risk of applying technical analysis to economic data, the patterns here look less vertiginous than in the mid-2000s. Things went straight up but it is too late to describe them as going straight down. So, for now, it is probably appropriate to pay attention to the “momentum” in home prices themselves, rather than to make the big call that this must end in tears.

If you are close to housing credit and believe that this interpretation is complacent, then please let me know. Housing credit crashes can ruin your week.

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Description automatically generated with medium confidence — *Source: BEA, Federal Reserve Bank of St. Louis (FRED), NBER, FH calculations*
*Data are actual to January.*

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