Housing experts everywhere are crossing their fingers ahead of tomorrow’s crucial home price index data report. Will the December Case-Shiller U.S. National Home Price Index prove the latest housing market crash catalyst?
The Case-Shiller Home Price Index measures monthly changes in single-family home prices in 20 major U.S. metropolitan areas. As such, it’s an important indicator for home prices country-wide. This time around, economists and realtors everywhere are likely hoping for a change of pace.
Indeed, the index is in the midst of a five-month losing streak, with November reflecting a 0.3% month-over-month decline. In fact, every city but Detroit reported lower home prices. San Francisco posted a shocking annual decline of 1.6%, the largest yearly drop in the Bay area in 10 years.
By all accounts, this is a notable reversal of the index’s historical trend. In fact, when the index first started falling, last July marked the first drop in the Case-Shiller since February 2012.
Unfortunately, with mortgage rates continuing to inch up in the face of an increasingly hawkish Federal Reserve, many analysts believe housing’s slump is far from over. This includes Craig Lazzara, S&P Dow Jones Indices Managing Director, who told Fox Business last week to expect further declines to the Case-Shiller.
“As the Federal Reserve moves interest rates higher, mortgage financing continues to be a headwind for home prices. Economic weakness, including the possibility of a recession, would also constrain potential buyers … Given these prospects for a challenging macroeconomic environment, home prices may well continue to weaken.”
U.S. home prices have been subject to plenty of turmoil in recent months and years. Since 2021’s pandemic-induced boom, fears surrounding an impending housing recession have only swelled. What’s in store for housing going forward?
Mortgage Application Data Fuels Housing Market Crash Concerns
With 30-year mortgage rates close to 7%, interest in buying a home has taken a nose dive. According to recent reports, historical housing metrics like existing home sales and mortgage applications are plummeting. In January, KB Home even reported a shocking 68% buyer cancellation rate.
Frankly, it’s pretty understandable to see so many Americans shy away from housing. With prices up 45% since the start of the pandemic and mortgage rates having doubled in just the past year or so, in more ways than one, it’s the worst time ever to put a down payment on a home.
Despite this, there are still some perpetual housing bulls. Phrases like “date the rate, marry the house,” encourage some potential buyers to pull the trigger, assuming they’ll be able to refinance their mortgage later on. But with prices falling across the country, timing the market may be a safer bet than getting in on a high-interest, inflated home amid a downturn.
More than $2.3 trillion in value has been wiped from the U.S. housing market since June. Pantheon Macro Economist Kieran Clancy believes housing may yet shed another 10% before the end of the year. “The downturn in sales is coming to an end … but a sustained recovery is a long way off.”
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
