Christopher Whalen: Are US home prices falling? | Cross River Real Estate

The most recent results from the Case-Shiller Index published last week suggests that through March of 2014, home prices were starting to visibly slow from the torrid, double digit rates of home price appreciation (HPA) seen over the past two years and more. Whereas in the last year HPA was more than 12% or 1% per month, in the first quarter of 2014, the National Index gained just 0.2%. Nineteen of the 20 cities in the index showed positive returns in March, but New York declined.
Not surprisingly, fast growing regions like Dallas and Denver reached new index peaks.

The Case-Shiller press release stated: “In March, the National and Composite Indices saw their annual rates of gain slow significantly. Chicago showed its highest year-over-year return of 11.5% since December 1988. Las Vegas and San Francisco, the cities with the highest returns, saw their rates of gain slow to approximately 21%; their post-crisis peak returns were 29.2% and 25.7%, respectively. At the lower end was Cleveland with a gain of 3.9% in the 12 months ending March 2014.”

But the fact that the Case-Shiller Indices are still showing positive HPA does not mean that home prices are still rising generally around the US. In fact, many professionals in the mortgage industry believe that home prices actually peaked last summer. But the Case-Shiller Indices, which are based on average home prices, tend to overshoot the change in direction of home prices, both on the upside and on the downside. Simply stated, the continued appreciation of some housing segments, for example, high-end homes in San Francisco, or distressed sales in the southwest, tends to mask the fact that HPA in many parts of the country has slowed or may even have reversed direction altogether.



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