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Real estate update



This is a slow week with not much happening, so I'm just going to post some updated charts and brief commentary.


The October Case Shiller home price index was a bit weaker than expected, and it has hit a new post-recession low. The Radar Logic home price index continues to track the Case Shiller index pretty tightly, and it confirms that housing prices on average are at a new post-recession low. Prices have been drifting slowly lower since mid-2010.


On a longer time scale, using prices only from the top 10 metropolitan areas and adjusting for inflation, the downward drift in prices in recent years is a bit more pronounced, but it's nothing at all like a free fall.


This chart compares the prices of residential properties to commercial real estate property values. Commercial real estate has fallen by more than residential real estate from its highs (-42% vs. -33%) and faster, but perhaps because of its more significant correction, commercial real estate now shows more signs of having stabilized. Prices are down significantly just about everywhere, and financing costs are at historical lows. The combination of the two makes for a gigantic effective price adjustment, and that's what it has taken to clear the property markets. Whether we need a significant further adjustment is the question on everyone's mind. If the heavy lifting is over (i.e., no more major downward price adjustments), then now would be a good time to start getting back into the real estate market.

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