17 Sep 22
A levelling off of home prices has accelerated the number of times I have seen accounts of sharply falling home prices in the media. There is a bit of a measurement problem with these reports. At any given time, you could find some incomplete estimate of home prices that could give you a range of +/- 5% or 10%, but aggregate prices just don’t change like that. Even in 2007-2010, prices at the steepest points of decline nationally were falling by less than 2% monthly, so it really is, even at its worst, like watching a slow motion train wreck. I suppose it’s possible that there could be unprecedented price trends in this cycle, but more likely when you see a report of prices in some segment or city declining suddenly by 5% or 10%, it’s a combination of compositional changes in the measurement, noise in the price data, the sentiment of the messenger, etc. There is a tradeoff between timeliness and relevance that is always difficult to balance, but I don’t think much is gained by putting credence in these volatile reports. The slower moving data shows the same trend shifts. It just doesn’t exaggerate them. So I don’t really see any loss of information by sticking with aggregate, slow moving numbers.