The WSJ ran this headline on the front page today: U.S. Home Prices Posted First Annual Decline Since 2012 in April.

The good news is that the article focused on actual “depreciation” and NOT on ridiculously misleading “median sale price” data.

BUT, the so-called decline was ONLY 0.2% – a statistically insignificant number if there ever was one.

The headline should have more accurately read: “Home Prices Held Steady Despite the Fastest Increase in Interest Rates in History!”

Median Home Price Nonsense – Again

I blogged about this in March (Putting Median Home Price Nonsense to Bed), pointing out how the median pizza price plummeted at JVM even though pizza prices went up overall in 2022.

It turned out that the only reason our median pizza price went down was because we were ordering smaller pizzas – and it had nothing to do with pizza deflation (or inflation).

Barry Habib made the same point again this week in his morning update, pointing out how home values actually appreciated 6% in 2022, while the median price FELL by 13%.

The media of course focused on the drop in the median home price – even though it was a result of a market shift to smaller homes (fewer high-end homes sold, skewing the median).

Barry used an example something like this:

If you have 5 homes selling in 2021 for $100,0000; $200,000; $300,000; $400,000 and $500,000 – your median home price is $300,000.

BUT – if only the $100,000; $200,000; and $300,000 homes sell in 2022 (and the $400,000 and $500,000 homes don’t sell), your median home price will drop by $100,000 to $200,000.

Actual Appreciation Numbers

Both FHFA (the agency that regulates Fannie Mae and Freddie Mac) and Case-Shiller just released their appreciation data for April, and that is what sparked both the WSJ headline and comments by Barry Habib.

Again, this data reflects actual appreciation and NOT median home prices.

Month-over-month appreciation (April compared to March) was 0.5% for Case-Shiller and 0.7% for FHFA.

Year-over-year appreciation (April of 2023 compared to April of 2022) was -0.2% for Case-Shiller and +3.1% for FHFA.

FHFA’s number was higher than Case-Shiller’s because FHFA only analyzes homes financed by conforming loans, e.g. lower-end homes with no cash transactions.

Case-Shiller’s number was lower because it took into account jumbo and cash transactions as well as all transactions financed with conforming loans – and it was primarily the cash transactions that brought down the number.

Case-Shiller further indicates that we are on pace for 3% overall appreciation in 2023, and FHFA indicates that we are on pace for 7% appreciation – far cries from a “crash.”

ANYWAY – this is a dead horse I will continue to beat as long as misleading negative headlines continue to surface.

The negative headlines are especially galling right now when so many markets are on fire simply due to an extreme lack of inventory.

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

    Get your instant rate quote.
    • No commitment
    • No impact on your credit score
    • No documents required
    You are less than 60 seconds away from your quote.

    Resume from where you left off. No obligations.