August 2022 Erdmann Housing Tracker Update

A levelling off of home prices has accelerated the number of times I have seen accounts of sharply falling home prices in the media. There is a bit of a measurement problem with these reports. At any given time, you could find some incomplete estimate of home prices that could give you a range of +/- 5% or 10%, but aggregate prices just don’t change like that. Even in 2007-2010, prices at the steepest points of decline nationally were falling by less than 2% monthly, so it really is, even at its worst, like watching a slow motion train wreck. I suppose it’s possible that there could be unprecedented price trends in this cycle, but more likely when you see a report of prices in some segment or city declining suddenly by 5% or 10%, it’s a combination of compositional changes in the measurement, noise in the price data, the sentiment of the messenger, etc. There is a tradeoff between timeliness and relevance that is always difficult to balance, but I don’t think much is gained by putting credence in these volatile reports. The slower moving data shows the same trend shifts. It just doesn’t exaggerate them. So I don’t really see any loss of information by sticking with aggregate, slow moving numbers.

Also, I am skeptical of reports of, say, sudden losses of several percentage points in places like Boise. It could be happening. But, as I posted recently, the cyclical reversion to normal has been ongoing in Boise for a year already. It could accelerate now, but reports of sudden volatility in prices now seem likely to reflect noise and messenger sentiment.

Zillow reported a slight increase in the median national home price, though the largest cities tended to decline. There seems to be a bit of a rise in the variance of price changes between cities too. Zillow estimated that prices have fallen the most, among the large metro areas recently, in Austin. Falling about 2% this month and a total of 4% over the last 3 months.