New home prices are falling nationally, existing homes regionally.
Cooling Fast
John Burns reports The Housing Market Is Cooling Fast.
- Resale prices are down compared to one year ago in 53 of 150 markets we track, with declines spreading beyond Texas and Florida.
- New home prices, including builder concessions and incentives, have fallen -1.5% versus last year as builders have been caught with too many completed, unsold homes for the first time in many years.
- Resale prices have risen in 65% of the country over the last year, so pay attention to local dynamics.
Price Drops Spreading
With new home construction exceeding job creation in most areas, the supply of newly built homes is outpacing new demand. Homebuilders are lowering prices and payments to find demand.
Price weakness has expanded across the Southeast, Southwest, and West Coast. Even some markets in the Midwest and Northeast, where tight supply previously supported strong pricing power, are seeing price appreciation slow rapidly. This geographic spread signals a widespread shift in pricing power.
New Home Prices Net of Incentives
Fewer Jobs Mean Fewer Homebuyers and More Renters
Employment growth has slowed, and some markets are losing jobs compared to last year.
Where jobs are still growing (but slower than before):
- Charlotte: +2.2% job growth YOY
- San Antonio: +2.0% job growth YOY
- Salt Lake City: +2.0% job growth YOY
Where jobs are declining:
Bay Area and other coastal markets are seeing YOY job losses.
The high-income sectors that typically drive new home purchases (Information, Financial Activities, and Professional and Business Services) are experiencing the steepest losses. When high-income workers lose jobs or face uncertainty, they’re less likely to buy homes.
Our analysis shows that rental market leasing through June was strong, despite the slowing economy and job growth. We believe most of the demand right now is for rental homes.
Mish Comments
The chart are year-over-year.
Burns does not list gains or losses in the first half 2025. The Case-Shiller indexes shows acceleration to the downside.
The Housing Top Is Likely In, Case-Shiller Home Prices Drop Again
On July 29, I noted The Housing Top Is Likely In, Case-Shiller Home Prices Drop Again.
The Case-Shiller Home Price Index declined another 0.3 percent in May.
The Decline Barely Registers
- From the peak, National is down 0.9 percent
- From the peak, 10-City is down 0.6 percent
That’s three consecutive monthly declines for Case-Shiller.
As with the Burns Index, year-over-year Case-Shiller prices are still positive.
I do not accept the NAR report that shows prices still rising.
On July 23, I reported Existing-Home Sales Decline 2.7 Percent, Median Price New Record High
Hooray, higher prices? That’s the message from the NAR.
That alleged Median Price Record did not happen. The NAR does a terrible job at seasonal adjustments (if it tries at all).
Click on above link for discussion. Expect rapid decline now in NAR median prices.
What About Rent? PCE?
Burns offered this pertinent comment “Our analysis shows that rental market leasing through June was strong, despite the slowing economy and job growth.“
If rent and Owners’ Equivalent Rent remain strong, the CPI will remain strong.
The Personal Consumption Expenditure (PCE) price index is the Fed’s preferred measure of inflation.
The PCE overweighs medical expenses whereas the CPI overweighs shelter.
Trump seems desperate to lower drug prices, but medical services, not medical commodities are the big medical price driver.
No Improvement in the Fed’s Preferred Measure of Inflation for 8 Months
On July 31, I commented No Improvement in the Fed’s Preferred Measure of Inflation for 8 Months
Core PCE is up 2.8 percent from a year ago, no change in 8 months.
The number to beat for July is 0.17 for both the PCE and Core PCE. Readings above 0.17 percent will result in an increase in the year-over-year numbers.
It was on this basis, and CPI medical care costs, I expected a rise in year-over-year PCE in the latest report.
There is not an easy-to- beat set of numbers until January 2026. Thus, I expect to see year-over-year core PCE back above 3.0 percent before January unless all hell breaks loose economically.
All hell could break loose, and by that I mean collapsing demand and job losses coupled with price declines.
But that’s betting on a trifecta, and a jobs market Trump will scream about.
For discussion, please see Payroll Disaster, Jobs Rise 73,000 but Massive Negative Revisions
