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Nobel laureate economist Robert Shiller stated in an interview on Bloomberg this week that he “wouldn’t be at all surprised” if U.S. home prices started to fall.  Shiller warned that fears of a recession driven by economic narratives such as the trade war and inverted yield curves could be just enough negativity to weigh on consumers’ desire to purchase a home. 

Last week, home sales, mortgage applications, housing starts, and permits all missed expectations.  Shiller’s own gauge of the housing market, the S&P CoreLogic Case-Shiller home price index rose just 0.11% month-over-month (half the expected rise) and slowed to just a 6.3% year-over-year gain—its weakest reading since December of 2017.  The “canary in the coal mine” moment for housing prices will come when some of the hottest markets begin to roll over.  But wait - one already has: Seattle, the home of Amazon, Microsoft, Starbucks and many other hot, growing companies.

Seattle’s Home Price Index (HPI) went negative year-over-year in May, as shown in the chart below from EPB Macro Research.  Should another hot market do the same, showing that Seattle is not an anomaly, we’ll have a trend - and not a good one.



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