Home Prices Fall in October – But Why

The Wall Street Journal and other news outlets reported today that the Case-Shiller index of home prices showed a decline in prices for October of this year. Not only do I want to ask “but why”, cialis but I also wonder if this is even meaningful data. For starters I am not sure why were are talking about October when the data for November has been out for a couple weeks now. Anyhow, malady before we get too up tight about the news of home prices declining I wanted to point out at least one major detail behind the numbers, at least for the DC Metro area. Have a look at this inventory chart and meet me below.

This chart of the DC metro area is consistent with the more local data from throughout the region. In the late summer / early fall we had a large, and rather rapid spike in inventory. In other words supply was way up. Why there was such a tremendous spike I am not entirely sure, but the point is there was suddenly excess inventory. Excess inventory means prices will naturally fall.

Keep in mind also that it is normal for prices to decline during these months as the summer market cools.

I do not want to imply that we have nothing to worry about when it comes to talk of a double dip and the like. I just wanted to add some context. As you see in the chart, inventory did recover to “pre-spike” levels, but it is back on the upward trend. Washington, DC was also one of the few cities included in the Case-Shiller index that showed an increase in prices. So, for us especially¬† the data is relative.

Wall Street Journal article

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