Housing: Bubble II?

Not the most polite question, to be sure, but worth asking with the release of this morning’s Housing Data.  Here’s the press release – see what you think:

NEW YORK, MAY 29, 2018 – S&P Dow Jones Indices today released the latest results for the S&P CoreLogic Case-Shiller Indices, the leading measure of U.S. home prices. Data released today for March 2018 shows that home prices continued their rise across the country over the last 12 months.

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 6.5% annual gain in March, the same as the previous month. The 10-City Composite annual increase came in at 6.5%, up from 6.4% in the previous month. The 20-City Composite posted a 6.8% year-over-year gain, no change from the previous month.

Seattle, Las Vegas, and San Francisco continue to report the highest year-over-year gains among the 20 cities. In March, Seattle led the way with a 13.0% year-over-year price increase, followed by Las Vegas with a 12.4% increase and San Francisco with an 11.3% increase. Twelve of the 20 cities reported greater price increases in the year ending March 2018 versus the year ending February 2018.

The charts on the following page compare year-over-year returns of different housing price ranges (tiers) for the top two cities, Seattle and Las Vegas.

Before seasonal adjustment, the National Index posted a month-over-month gain of 0.8% in March. The 10-City and 20-City Composites reported increases of 0.9% and 1.0%, respectively. After seasonal adjustment, the National Index recorded a 0.4% month-over-month increase in March. The 10-City and 20-City Composites posted 0.4% and 0.5% month-over-month increases, respectively. All 20 cities reported increases in March before seasonal adjustment, while 19 of 20 cities reported increases after seasonal adjustment.

“The home price increases continue with the National Index rising at 6.5% per year,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “Seattle continues to report the fastest rising prices at 13% per year, double the National Index pace. While Seattle has been the city with the largest gains for 19 months, the ranking among other cities varies. Las Vegas and San Francisco saw the second and third largest annual gains of 12.4% and 11.3%. A year ago, they ranked 10th and 16th. Any doubts that real, or inflation-adjusted, home prices are climbing rapidly are eliminated by considering Chicago; the city reported the lowest 12-month gain among all cities in the index of 2.8%, almost a percentage point ahead of the inflation rate.“

In our view, the gains reported today are understandable:  The Federal Reserve has been telling anyone who will listen that “Rates are going up!”  There is also about an even-bet that they will follow  through and actually raise at their June meeting in a few weeks.

All of which leads to deeper analysis, but that will be on the Peoplenomics side of the house tomorrow.  For now, the main thing to be asking is “Are we in another Housing Bubble?”

Officially, no.  But at what point do we cross the threshold?

Regardless of the data, with 20-minutes to the open, Dow futures were still down 150.  Although, my earlier happy-dance at the prospect of down 200 is a bit muted, the decline is likely to be very much like a “morning after a three-day bender” for the market today.

The only real question is whether we will bounce back and close above critical support which is nearby?

16 thoughts on “Housing: Bubble II?”

  1. George the new website is looking good. With that being said, The charts are slow loading on my iPad. Also, I would prefer a little larger type font. I can pinch and zoom out but then have to scroll back and forth to read. I hope the new improved website doesn’t turn out to be like the New Coke. LOL

  2. The charts are unreadable on my 9.7″ tablet. Do I have to accept cookies to continue to use this site? I read the privacy & cookie policy & would prefer my info not be shared.

    • No, you don’t have to accept cookies. The notice will be set to disappear in 3-seconds shortly

  3. “Housing: Bubble II?”

    Realistically imho.. They cannot stop going up!

    My theory.. Run away energy costs for one.

    Run away corporate profit projections.. Bonuses and wages.

    When I worked one hat..I made 6.50 an hour.. Below our shop was a local electric companies shop.. The linemen at the time made 15.00 an hour and the boss 25.00 an hour..
    Nurses made five dollars an hour. A med tech. Made 3.50.
    Now today..the guy working in county job makes 12.00 an hour nurses start out at 18.00 to 24.00 an hour depending on specialty and flight for life rn’s are around forty.
    The med tech is setting at 8.50 – 14.00 depending on whether or not your going to school. Top wage for that position is 16.00 .. Now the lineman.. The starting wage is just under a hundred an hour. Which means it is out pacing the economy. A five percent jump in gas prices is astronomical. Do the reverse pyramid and its obvious. Until there’s a total collapse prices will have to continue skyward

    • You do know why a lineman (at least the good ones) are worth that – an ‘old lineman’ is a good one – my grandfather was a lineman for our local electric company for over thirty-five years. An intelligent, physically fit man, who was expected to work in all kinds of weather – dealing with a substance that was inherently dangerous, i.e. electricity.

      He had seven children (normal for the time) whom he rarely saw – I read a note that my dad wrote detailing a regret in his life, that he wished that his dad didn’t have had to work so much. But that was the price for supporting his family at the time.

      Hopefully the current linemen have better balanced lives.

  4. I updated Schiller 100 year prices for housing inflation that was published five years ago.You can google the old chart. From 1900 to 2000. Chart was always between 80 to 120. In early 2000’s it went up to 200. 40% over valued at least. Guess what prices did in 2008 to 2012. Down 40%.
    My figure say we were 30% overvalues a couple of months ago over the 120. Remember the over valuation only get you the top of the past 100 years. It could go down to the 80% mark. Which would be a 50% drop in home prices adjusted for inflation.

      • Have the banks ever had a majority of home loans and the associated value of the house, go down 50% in the past? Is there any precedent for that in the past decades? I know 2008/2009 was bad, but the fed came in and made things whole. I don’t know that the fed can do that again if existing loans and all those since 2008/2009 and the associated equity/value of the homes those loans are based on, goes down 50%. That would make many banks have upside down equity on a huge amount of assets and if those loans go delinquent, doesn’t that mean bank failures? Or will the fed bail out the banks (or the depositors assume that role).

  5. I think the part that scares me is.. There isn’t a instant blue sky. If its true that college grads are making just shy a quarter million a year and average homes are around quarter to half. While the average employees economic increase averages around two percent a year. We all know how its done. Push till it hurts then back off slightly.. Everyone feels relief yet the prices increase. Wages aren’t matching for the bottom feeders with children. Doing reverse pyramid its obvious that those slight increases have to be passed on eventually. People over purchasing will stop.what I see is a Possible hyper inflation then the collapse of the dollar. Similar to the German depression in what 1918 or so. Then restructuring the dollar. What was it then million to one..when the depression hit the us a.. My grandparents mortgage didn’t change one cent. This could catch quite a few with huge home loans with their pants around their ankles.
    The way I see it is its already to late.raise interest money slows. Follow the money looks pretty bleak to me.

  6. I have the same problem with font size. Larger better.. I saw no indication of winnings on Oklahoma trip so take that as you lost your ass.
    I enjoy your ramblings, entertaining so read them…

  7. George,
    Didn’t get any of the graphics on my phone! It’s an old S4 and has some memmory limitations but at this point I’d rather have the old format.

  8. Exactly M.D. I can say I would never want that job, or a tower climber. Water tank painter. There’s no sane reason to climb two thousand feet in the craziest weather to change a light bulb in high winds or to go out in pouring rain and handle high voltage lines. My job at the time was dealing with hazardous waste.
    As far as never seeing your children grow.. I’m there with you on that. I worked day and night .. I am making up for lost time with my grand kids. But I missed everything with the kids. The point i was pointing out wasn’t that they didn’t deserve the money but that career wise the wages outpaced the general economic growth. Do the reverse pyramid and just the minimum increase from last year alone should have resulted in a one percent wage bump.. now take that to the next level. To keep the economy thriving means you keep the money moving. Give it to a small sector won’t let it move. Spread it out.
    A couple years ago fast food workers wanted a wage jump to fifteen. The consensus was that the economy would collapse. They should have asked for twenty. You cannot have run away inflation it in many ways is very fragile and systematic to changes. That is why one in three get financial assistance from the social programs. The innovators and industrial giants of yesterday realized that. Unfortunately we have digressed as a society in the direction of failed endeavors of the past. That will result the same as they did then.

  9. I live in the third hottest housing market. My realtor told me buyers can offer less than asking these days.

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