We saw this week that the local seasonally-adjusted Case-Shiller Index has been trending negative since April. Here we see how the recent gains have been driven by the lower-end properties:
The difference could simply be a percentage thing – a home’s value that goes from $300,000 to $400,000 has risen 33%, while a $700,000 home that goes up to $800,000 has only increased 14%.
But the underlying story is that the upper-end home values haven’t done much over the last 18 months.
Read more here:
As in 2010, today’s price movement is the tail end of a mini-bubble, set into motion some 18 months earlier. This price rise was produced by short-lived speculator interference in 2013 (not a tax stimulus, as in 2009). This pricing activity is under pressure from insufficient personal incomes, rising fixed-rate mortgage (FRM) rates and new construction.
Prices are expected to continue to fall in the coming months, bottoming in 2015 and retreating toward the mean price trendline. The cooling of speculative fever and continually rising mortgage rates will prolong the falling trend in sales volume, pulling prices down in turn. Remember, real estate prices track and run with bond prices due to interest rate movement. A lag time of a couple of months exists due to remaining perceptions of past real estate price movement — the sticky price phenomenon.