🌞Miami: So Hot Right Now

Plus, nominal v. real prices; or, tomato tom-ah-to 🍅

Author

The Butterknife Team
December 30, 2022

In today's issue:

  • Has the housing market peaked yet, and what's the diff between real and nominal prices?

  • Doesn't look like we'll be moving to Miami anytime soon.

  • Eric Basmajian put together an incredible breakdown of the housing market to end the year (Eric, if you're reading this, please come work for us.)

  • Rates are back where they started the week (and let's hope they stay there.)

🔖 In case you missed it: A federal appeals judge has reversed a prior dismissal of the ongoing class action lawsuit against Grant Cardone and his company, Cardone Capital.

🍅Nominal Prices and Real Prices; Tomato Tom-ah-to

butterknife here, with another update on the housing situation (we don't know how to talk about anything else around here.)

Yesterday, we covered the drop in pending home sales as reported by NAR, and today, we want to talk about the other side of the coin: the ongoing drop in home values nationwide.

First, let's get some terminology out of the way (bear with us.)

A critical distinction when talking about home prices is nominal versus real prices.

Nominal prices are easy, they're what's on the sticker. If a home was worth $450,000 last week, and it's worth $445,000 this week, its nominal price has gone down. Real prices are the same thing, but adjusted for inflation, which is important to note when looking at a year that saw some of the highest inflation metrics in decades.

According to Bill McBride at Calculated Risk, real (or inflation-adjusted) home prices are now 3.8% below their recent peak, and will likely continue to trend downward until something about the broader market changes.

That marks the least "affordable" housing in the US since 1982, when 30-year mortgage rates exceeded 14%.

❓Did you know: In response to the rampant inflation of the 1980's, the Fed Funds rate went as high as 20% at one point.

🌞Miami -- So Hot Right Now

Yesterday, our friends over at CNBC put together a list of the least affordable housing markets in the country, with Miami topping the list at a whopping $598,000 median asking price.

That means a family with a household income of $44,581 (Florida's average) would be spending something like 85% of their paycheck on housing costs, were they to purchase in Miami. Could be worse, though — you could be in Toronto.

To see CNBC's full list and analysis, check out the original article here.

🤡 Fun Fact: If you're a baseball fan, you can now purchase Derek Jeter's multi-million dollar... castle?! (At auction, for some reason.)

🐦Thread of the Week

We won't go into... whatever it is that's going on at Twitter (unless it starts to boil over into real estate, which wouldn't even be the strangest thing to happen in 2022,) but we did want to highlight Eric Basmajian's incredible breakdown of the current housing market.

Eric, if you're reading this, please come work for us. We only pay in the form of Cheez-Its, but we promise it'll be fun!

👀All Eyes on Rates

Rates returned to where they opened the week, according to Mortgage News Daily, which had the average 30-year fixed mortgage at 6.5% when markets closed last night.

Freddie Mac also updated their weekly survey, averaging 6.42% for the 30-year fixed.

For other products, check out the full rate survey here.

Wait! Before you Go...

If you're reading this, it's because you're one of our first 100 subscribers. Isn't that incredible? Thanks for coming along for the ride, and we hope today's issue was entertaining and informative (if it wasn't, feel free to send us a nasty e-mail.)

But if it was, could you do us a favor? We'd really appreciate it if you forwarded this issue to one of your colleagues or friends who are interested in real estate, and encouraged them to subscribe. It's totally free, what have you got to lose?

Until tomorrow,

the butterknife team.