The S&P Cotality Case-Shiller U.S. National Home Price NSA Index posted a 1.3% annual gain (YoY) for December 2025, down from a 1.4% rise in the previous month. Average hourly earnings now at 3.73% YoY, higher than home price growth.
Home price growth exploded following The Federal governments’ Covid-related spending splurge.
Geographic divergence widened sharply: Chicago and New York led all markets with gains above 5%, while Tampa, Phoenix, Dallas, and Miami posted the steepest declines among markets that finished the year in negative territory.
Inflation cooled significantly under Trump, but The Fed keeps printing M2!
Underlying U.S. inflation increased more than expected in December, and signs are pointing to a further acceleration in January, which would strengthen expectations that the Federal Reserve would not cut interest rates before June.
The personal consumption expenditures price index, excluding the volatile food and energy components, rose 0.4% after an unrevised 0.2% gain in November, the Commerce Department’s Bureau of Economic Analysis said on Friday. In the 12 months through December, core PCE inflation advanced 3.0% after increasing 2.8% in November.
The PCE price index increased 0.4% in December after rising 0.2% in November. PCE inflation increased 2.9% year-on-year after gaining 2.8% in November.
But in terms of contributions to the 0.4% figure is that durable goods rose 2.051%.
The Fed has been printing money (M2) like there is no tomorrow. With M2 growing at 4.6% YoY in December.
…but ended the year at 745k – the highest SAAR since 2021…
“New” home sales have notably decoupled from “used” home sales in the last few years as homebuilders incentivize buyers (reducing margins) and lower prices (reducing revenues)…
Lower mortgage rates support modest further improvements in sales…
Rate-cut expectations have surged (dovishly) higher this week (along with tumbling Treasury yields) amid a mixed macro picture (Labor market ‘good’, Retail sales bad, Housing ugly).
Today could change all that as CPI for January prints with risk skewed to the upside. January brings annual resets and they tend to surprise on the high side.
Despite the ‘hot’ whisper numbers (and 4 previous Januarys in a row of upside surprises), headline consumer price inflation came in cooler than expected in January (+0.2% MoM vs +0.3% expected). That pulled the headline CPI down dramatically from +2.7% to +2.4% – near the lowest in 4 years.
Core CPI printed +0.3% MoM (in line with expectations), lowering the YoY change in core prices to +2.5% – the lowest since March 2021.
The Shelter index rose 0.2% in January and was the largest factor in the all items monthly increase. The food index increased 0.2% over the month as did the food at home index, while the food away from home index rose 0.1 percent. These increases were partially offset by the index for energy, which fell 1.5% in January.
January saw real average weekly earnings rise 1.9% YoY – its highest since March 2021…
The analysts were correct on the direction but wrong on the scale as existing home sales plunged 8.4% MoM in January from a downwardly revised +4.4% MoM in December. That is the biggest MoM drop since February 2022.
While some suggested this could be impacted by the Winter Storms, this is based on contracts signed in November/December… and the biggest decline was in The West (which had zero weather impact)
Nevertheless, realtors gonna realtor:
“The below-normal temperatures and above-normal precipitation this January make it harder than usual to assess the underlying driver of the decrease and determine if this month’s numbers are an aberration,” NAR Chief Economist Lawrence Yun said in a statement.
That MoM plunge pulled the total SAAR down near 15 year lows…
Without an extended period of improved affordability, the recovery in the housing market is likely to be prolonged.
The NAR report showed the median selling price rose 0.9% from a year earlier to $396,800 last month.
First-time buyers represented 31% of buyers of existing homes in January, up slightly from 29% in the prior month and higher than a year ago.
The inventory of previously owned homes increased 3.4% in January from a year ago to 1.22 million.
A pickup in supply through 2025 has helped to tame price growth, though Yun said on a call with reporters that listings need to increase much more to help improve sales.
On the bright side, it appears mortgage applications are rebounding as the year started with lower rates…
Source: Bloomberg
Arguably, existing home sales have much further to go to the upside as the lagged mortgage rate has continued to decline… so what triggered this collapse?
Source: Bloomberg
Finally, circling back to where we started, NAR expects home sales to rise a stunning 14% this year, higher than most other forecasts but a figure that NAR Chief Economist Lawrence Yun said he feels “confident” in. That assumes more inventory will come on the market, mortgage rates will hover around 6% and the Fed will cut interest rates another two times, compared to policymakers’ median projection for one.
Yikes! The ratio of US Home Prices to US Median Household Income is now higher than the ratio during the catestrophic housing bubble during the latter half of the 2000s.
Here is a chart of home prices and median household incone,
The labor market is truly screwed-up. The December jobs report reveals that women account for nearly all labor force losses.
I ain’t drunk! But it would help in this housing market where housing prices and mortgage rates are much higher than when Joe Biden became President in January 2020. In fact, the Case-Shiller national home price index is 55% higher than when Sleepy Joe took the reins of Presidency and the 30-year mortgage rate is 64% higher.
Because of higher housing prices and mortgage rates,
The Case-Shiller national home price index is 55% higher than when Sleepy Joe took the reins of Presidency and the 30-year mortgage rate is 64% higher.
As a result of higher housing prices and mortgage rate (and Gavin Newsom’s ludicrous policies), it will take over 30 years to accumulate enough savings to buy a home in San Diego, Los Angeles, San Jose and San Francisco.
I ain’t drunk, but first-time homebuyers will need to be drunk in this housing market.
According to Redfin, US pending home sales fell to the lowest since the Covid epidemic of 2020.
With the population change from state to state, like New York, California and Illinous to South Carolina and Idaho (home of Napolean Dynamite), it is no wonder that the housing market is in a state of turmoil.
Confounded Interest - Anthony B. Sanders 
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