Home prices have regressed to the mean

Daily Data: Inflation-adjusted home prices came "back to normal"

Random Walk makes the belated realization that it made a very accurate prediction of home prices.

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Everything reads better in your browser or in the app. The footnotes especially, and Random Walk is really leaning into the footnotes. Plus, if you have the app, you can set delivery to “app only” and then my daily barrage will feel less like a barrage. Unfortunately, substack does not yet have a “Weekly Digest” option, but I’m hectoring them aplenty.

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Daily Data

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Home prices have regressed to the mean

Random Walk has long maintained that at a minimum, home prices would regress to the mean—given more time with high rates, they will regress worse than that—but for now, I’ll take the victory lap on the original call.

I’m not entirely sure why neither I, nor anyone else, has really noticed until now, but inflation-adjusted home prices aren’t quite on pre-pandemic trend, but they’re awfully close:

It was actually the big decline in 2022 that brought things back to the trendline, and then after a little flatness, prices started “rising” again, just like the pre-pandemic trendline says they should.¹

In other words, inflation-adjusted prices + mean regression (had anyone noticed), “called the bottom.”

Amazing.²

Supply creep

Anyways, if you want a peak at what comes next, there is at least one signal that’s blinking, albeit a bit faintly.