States with home-price drops (Graph by Flourish)
“Crash, correction or chill” looks at economic and real estate trends that offer hints about how deep housing’s troubles may be.
Buzz: None of the 50 states have been a home-price loser in the past 24 quarters – that’s six years!
Source: My trusty spreadsheet reviewed year-over-year home-price changes for each state as tracked by the Federal Housing Finance Agency’s quarterly indexes that go back 46 years.
Topline
The last time any state had a 12-month decline in home prices was 2016’s second quarter – and it was just Connecticut. In fact, minus three quarterly pricing dips in the Nutmeg State, the national winning streak would go back 33 quarters – that’s just over eight years.
Historically speaking, this recent loss-free pricing streak for U.S. housing markets tops the 23-quarter streak that ended in 2006 – just before the bubble burst into the Great Recession.
Details
Housing is still “location, location, location.”
So try to ignore commentary on the national market because local housing looks quite different – even when “local” is simply each state’s market.
History tells us price losses by state are more common than you might recall. Since 1976, the average quarter had eight states with prices lower than 12 months earlier. But the tally of losses varies widely.
Connecticut’s 61 dips in 186 quarters is the most among the states. Then comes Rhode Island (53), New Hampshire (48), California (46) and Maine and Massachusetts (44).
Fewest? Kentucky’s 16 followed by Iowa and North Carolina (17), Nebraska (18) and Indiana and South Carolina (20).
The Great Recession’s housing crash put 50 states of 51 tracked (including Washington D.C.) into price declines in two quarters of 2010.
And losses weren’t just found in the bubble bursting era of the 2000s. Seven states on average had losses in each quarter between 1976 and 1999.
Conversely, 31% of the time, no state losses could be found in the past 46 years.
Bottom line
The current no-loss streak seems in jeopardy as mortgage rates soar, purchasing wanes and recession fears grow. And California has a habit of being ahead of real estate’s curves – up or down.
So is this a crash, correction or chill?
It looks like a sign of at least a “correction” coming. We’re seemingly overdue for price adjustments no matter what’s up or down with mortgage rates or jobs or the economy.
Look, price drops aren’t good or bad. They’re just part of any market’s ebbs and flows. Depreciation is often a necessary event to keep prices – not to mention the mentality of owners and house hunters – in line with economic realities.
And we certainly have had a shortage of price drops in recent years.
The unknown
Between 1976 and 1999 there were only five quarters in which no state had a 12-month price loss. Since then, there have been 53 – wrapped around a market housing crash.
Is this gap in a curious yardstick of housing tranquility simply a random pattern?
Could this switch in volatility be the result of big-picture changes from housing’s economic standing to demographic swings to manipulation by policymakers?
Or has housing’s well-known habit of being a boom-or-bust asset only gotten wilder?
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com
Originally published at Jonathan Lansner