Deciphering The Terrifying Housing Decline Numbers from Case-Shiller

Rates Fall in the Face of Fed Rate Increase

Rates fell today even though the Fed will increase “rates” today. I encourage everyone to re-read or re-share this blog: The Fed Does Not Control Interest Rates!

BUT – our jumbo rates are largely the same today because the CFPB pushed Wells Fargo out of the industry – so there is less competition in the jumbo realm, as per this blog: Love & Hate for Wells Fargo.

Case-Shiller Released Its Housing Data Yesterday – And the Media Are Freaking Out, as per Usual!

“…Yep, I just wrote an offer on a house in Clayton, and there were 20 other offers!” That was a note from an agent I received yesterday in response to my Monday blog: Market Shockingly Hot!

It was ironic because at the same time, I was again seeing “doom and gloom” media reports about the housing market.

Here is my favorite that popped into my Google feed yesterday: Rising Inventory Will Accelerate a 20% Plunge in Home Prices.

Here is the WSJ today: Home Prices Fell For the Fifth Straight Month! (in response to Case-Shiller’s report)

The WSJ was comical because they failed to mention two things: (1) the declines were minimal; and (2) they followed 121 months or TEN+ YEARS of steady appreciation.

Here is what Case-Shiller and the FHFA recently reported for November:

Case-Shiller: 7.1% year-over-year gain; 0.6% decline from October.
FHFA: 8.2% annual increase; 0.1% decline from October

FHFA numbers are more positive than Case-Shiller’s because they only reflect values associated with “conforming loans” or for lower-end homes, as FHFA is the agency that oversees Fannie Mae and Freddie Mac.

Case-Shiller reflects ALL transactions – including jumbo and cash buyers. The percentage of cash buyers has increased, and that tends to push prices down a bit because sellers will offer discounts to cash buyers. The high-end market is also a bit softer than the lower-end market.

Also – if you adjust for the “seasonal slowdown/decline” that always takes place in November, Case-Shiller’s month-over-month decline is actually only 0.3% (or pretty much zero).

But – the big news is that prices are only off by 3.6% from their peak, according to Case-Shiller, and only off by 1.2% from their peak, per FHFA.

And – given that the market is obviously heating up now, given that rates will almost certainly fall and bring more buyers to the market, and given that spring buying season will soon hit and create even more demand – I will bet anyone dollars to donuts that we have seen the worst of the declines.

The reason remains the same: INVENTORY! Once again – we had 4 million units for sale in 2007 prior to the 2008 collapse, and we have only 700,000 units now (data points I am going to repeat until I am blue in the face).

What about the Surge in Foreclosures?

The % of foreclosures is way up only because there were almost no foreclosures last year and in 2021 because of moratoriums and a stronger economy. So, if your baseline number is extremely low, any increase will look large in % terms. The number and % of foreclosures is a mere fraction of 2008 numbers.

Jay Voorhees
Founder | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167

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