Economy Watch: Housing Sees Modest Price Increases

The latest Case-Shiller indexes are out, and they point to smallish increases in the prices of houses nationwide.

The latest Case-Shiller indexes are out, and they point to smallish increases in the prices of houses nationwide. The National Index has been moving sideways for the last six months or so, with year-over-year increases about the same as they were in February 2015, which is the end month of the latest Case-Shiller report: 4.2 percent. In October 2013, the National Index was up 10.9 percent compared with a year earlier, which in retrospect looks like the high point of a post-recession bounce. Fortunately, conditions weren’t ripe for a new housing bubble, so despite low interest rates and pent-up demand for housing, prices haven’t bubbled up unsustainably again.

That’s especially true adjusted for inflation (Case-Shiller uses nominal values). Adjust for inflation and house values are roughly back where they were in 2003. Graph real prices over the last decade and there’s an enormous Matterhorn of increases in the mid-2000s. Current real prices aren’t anywhere near the peak of that Matterhorn (bubble peak, to use a more common metaphor), at about 21 percent lower. Probably that’s just as well, since a return to such a peak wouldn’t be sustainable this time around either.

Separately, and it also counts as good news for the housing industry, CoreLogic reports that distressed housing sales—REO and short sales—accounted for 13.5 percent of total home sales nationally in February 2015, a 3 percentage point drop from February 2014 and a 0.8 percentage point decrease from January 2015 (though distressed sales shares tend to drop in the winter). In any case, the February 2015 distressed sales share was the lowest for any February since 2008, which is yet another sign that distressed properties are much less of a drag on the rest of the residential market than they used to be.

Clarification for Tuesday’s Economy Watch: Citing walkability as a factor in the Expedia’s move to Seattle was incorrect; the company didn’t publicly mention that that as a reason for the move. EW regrets the error. The main thesis of the column seems solid, though: more walkable areas are going to do better in terms of property values than less walkable ones. Also: Bellevue, Wash., regardless of its various Walk Scores (neighborhoods differ), is without a doubt one of the more dynamic real estate markets in the country.