This morning we got home price data which showed slowing momentum.
Prices were up over 10% from last year, but those gains are down a bit from recent peaks. And in general, the housing numbers have been mixed. Starts and sales, though up significantly from recent years, remain quite low by historical standards, and don’t appear to be on the verge of surging higher.
Via email, Stan Humphries (the top economist at real estate site Zillow) has the best characterization of the market that we’ve seen. Read this whole thing, especially the part that we’ve highlighted.
“There’s no doubt that these can be confusing times for ordinary people trying to read the tea leaves. Home sales are up for the month, but down for the year. Case-Shiller is way up for the year, as always, but slowing. Inventory is coming back, but not at the low end of the market. Negative equity is falling, but is still extraordinarily high in many areas… The reality is that the market is moving from one defined by distortions including high negative equity and constricted inventory, to one defined by fundamentals like household formation rates, jobs and income growth. Unfortunately, some of these fundamentals are still fairly weak. This is a multi-year process that we are far from done with. This ride is not for the faint of heart, but we are slowly getting back to normal.”
Humphries is absolutely right about all of the distortions that have characterised the market in recent years. First there was the crash, obviously. Then the snapback. Then all the sales of distressed homes and huge investors scooping up homes in droves. All of these things are fading, and now we have something increasingly resembling a normal housing market.