A Chill Is Being Felt in Housing

by Guest Author Scott Sambucci, Altos Research

“Chill out, man. I told you it was an accident. You probably went over a bump or something.” -Vincent Vega, Pulp Fiction

Speaking of bumps, it seems we have reached the end of the summer price bump.

We’ve called this effect the “Catfish Recovery.” Home prices nationally responded well to spring-time demand and ultra-low interest rates. Now as the summer ends, housing demand shifts and prices will decline to bump along the bottom of the pond again.

This month, seven of the markets reported declining prices. Compared to only one market reporting declining prices last month, that’s a noteworthy difference.

In addition to the first signs of prices changing direction, twenty of the markets in this report reported rising inventory this month. Twenty-one of the markets reported rising inventory at the three-month level.

The party is almost over, folks. You don’t have to go home, but you can’t stay here.

The weekly prices are still trending downward, as they have been for the past six weeks. Five markets reported price increases this month, albeit small increases. Detroit was the only market reporting more than a 2% price increase.

Rising inventory across the composite markets provides further evidence of a gradual cooling of the summer market. Only six markets have escaped the rising inventory trend over the past three months.

The data in this report cover the narrow Altos 10-City Composite. Looking at the more broad, Altos Research 20-City Composite, we see the weekly price declines, but month over month declines have not quite yet translated into the smoothed, 90-day trend line.

Key takeaways from 26 markets covered in this report:

  • The Altos 10-City National Composite median price ticked down to $450,176 in July from $450,894 in June. The first month over month decline in five months.
  • Inventory was up in 20 markets and down in 6 markets. The biggest inventory increase was Boston (4.89%) and the largest decrease was Phoenix (-6.82%).
  • Only one market reported a price change larger than 2%, which was Detroit (2.38%).
  • The biggest price changes were small again this month, which is a continuation of last month’s trend. The three biggest changes were in Detroit (2.38%), New York (-1.69%), and Denver (1.47%).
  • Prices decreased in seven markets, which is a significant change from the one market reporting decreasing prices last month (Las Vegas).

The 7-day numbers are trending downward. The 7-day trends are always the first indication of a shifting market and the 90-day numbers are beginning to show the flattening that was first reported last month.

Trends: August Home Prices

The national composite markets reported declining prices in seven markets. The biggest price decreases were seen in New York (-1.69%), Boston (-1.08%) and Miami (-0.73%). Seven markets reporting declining prices this month is a significant change because only one market reported declining prices last month.

The weekly price numbers are still trending downward. The biggest price increases were small. Only five of the markets reported price increases larger than 1%; only one market report a price increase larger than 2%.

Trends: Housing Supply

Inventory in the national composite was up this month, but only slightly (1.59%). Overall inventory has increased 5.03% over the past three months. The 7-day inventory numbers have indicated rising inventory for the past six weeks and 20 of 26 composite markets reported rising inventory this month. The loss of momentum from the spring and summer markets is confirmed.

The largest increases in inventory were reported in Boston (4.89%), New York (3.55%), and Minneapolis (2.58%). The largest declines in inventory were reported in Phoenix (-6.82%), Tampa (-6.60%), and Miami (-2.29%).

This month, there are 21 cities reporting rising inventory at the three-month level (last month there were eleven). This is a significant change and will be reported by S&P/Case-Shiller when they publish their transaction statistics this fall.

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