It’s no secret that the housing market is in bad shape. Higher interest rates and record-high prices have crushed the demand side of the equation, and supply remains tight.
With that said, we got some additional data today so let’s take a look… 👀
First is the S&P CoreLogic Case Shiller national home price index. It dropped for the third straight month in September (-0.80%), with YoY price growth slowing to +10.80%. While the yearly change is still very high, seeing prices cool for several consecutive months is a positive sign for the Fed, which has been trying to bring prices down. 🧊
Meanwhile, Fannie Mae and Freddie Mac will raise the limits of government-backed loans to a new record level in 2023. The maximum loan limit in some high-cost areas will be over $1 million. Some argue that this does nothing to solve the real driver of the housing crisis, record-high prices, and simply allows borrowers to take on more debt than they might be able to handle.
Last week existing home sales fell for the ninth straight month, dropping 5.80% MoM and 28.4% YoY. The median price of an existing sold home was $379,100, a 6.60% increase YoY. 🏘️
So while it’s not happening quickly at the national level, the Fed’s tightening is having a slow but steady effect on housing. Certain markets that boomed during the pandemic have seen significant drops as some froth comes out of the system. And others are simply leveling off as demand dries up.
Lastly, Bank of America’s CEO is predicting two years of pain ahead for the housing market before activity returns to normal. 🔮
Tomorrow we’ll hear October’s pending home sales data, which will give us another piece of the puzzle. But overall, housing continues to correct to the downside. 📉