Tag Archives: housing bubble

Hong Kong Condos Begin Underwater Journey As 20% Drop Results In Negative Equity

https://pix6.agoda.net/city/16808/16808-7x3.jpg?s=1920x

Hong Kong homeowners who bought flats in the last several months have seen their value decline as much as 20% in a matter of recent weeks, according to HSBC, sending values into negative equity which had only left the region from the prior downturn that ended in early 2017, reports the South China Morning Post.

https://www.zerohedge.com/sites/default/files/inline-images/hong%20kong%20housing.jpg?itok=PCFgNQk5Hong Kong’s famously expensive property market has started to feel the strain lately from a fall in demand caused by rising interest rates, a struggling stock market and fears about the impact of the US-China trade war. Negative equity occurs when a home loan exceeds the market value of the property, and has not been seen in Hong Kong since early 2017. –SCMP

“Theoretically, buyers who obtained a mortgage of 90 per cent of the flat’s value will fall into negative equity once home prices have dropped more than 10 per cent,” said Chief Vice-President at mReferral Mortgage Brokerage Services, Sharmaine Lau.

The largest losses are likely to be flat owners who paid sky-high prices for tiny apartments in older tenements, according to industry watchers, who add that banks tend to become very conservative in valuing such properties when the real estate market takes a turn for the worse.

https://assets.bwbx.io/images/users/iqjWHBFdfxIU/ibCYKiHZaaG4/v0/1200x-1.jpgPhotographer: Justin Chin/Bloomberg

“Lower valuations will first apply to flats that have less marketability. Banks’ valuations, which are supported by surveyors, are made in line with market conditions,” said Cushman and Wakefield head of valuation and advisory services for the Asia-Pacific region, Chiu Kam-kuen. 

Meanwhile, SCMP was able to find apartments at older housing developments which are now valued at HSBC far below their recent selling prices. 

A 234 square foot unit at 36-year-old Lee Bo Building in Tuen Mun, which was sold for HK$3.82 million on October 8, is now valued 20 per cent lower at HK$3.08 million. In North Point, a 128 square foot unit at 41-year-old Yalford Building, sold on August 29 for HK$3.1 million, is also valued a fifth lower now by the bank, at HK$2.48 million.

In Kowloon, a 210 square foot unit at 34-year-old Hong Fai Building in Cheung Sha Wan sold for HK$3.87 million on June 20 is already down about 13 per cent, according to HSBC, at HK$3.38 million.

The spectre of negative equity is only going to get worse, according to Louis Chan, Asia-Pacific vice-chairman and chief executive for residential sales at Centaline Property.

“More homeowners will fall into negative equity next year as flat prices may decline by 10 per cent,” he said. –SCMP

The precipitous drop may force companies such as the Hong Kong Mortgage Corporation (HKMC) to adjust their mortgage insurance program in light of market developments. 

Under the program, buyers of flats worth less than HK$4.5 million can get mortgage loans of up to 90 per cent of the unit’s value, capped at HK$3.6 million, while for flats priced between HK$4.5 million and HK$6 million the maximum loan-to-value ratio is 80 per cent, capped at HK$4.8 million.

In the first quarter of 2018, HKMC said 6,955 applicants secured HK$26.86 billion in home loans under the mortgage insurance program. In 2017, a total of HK$32.3 billion in mortgages were granted to 8,829 applicants, up from HK$24.6 billion of 7,145 successful in 2016. –SCMP

Negative equity reached its peak in Hong Kong in 2003 following an outbreak of Severe Acute Respiratory Syndrome (SARS) which sent already-teetering home values plummeting. According to the HKMA, over 105,000 households found themselves in negative equity at the time – all of which were above water as of the first quarter of last year.

Source: ZeroHedge

Advertisements

Bubble Trouble? Fannie And Freddie LTVs Higher Now Than During The Catastrophic Housing Bubble

Fannie Mae and Freddie Mac, the mortgage giants in seemingly perpertual conversatorship with the FHFA, have mortgage loans that are even more risky in terms of loan-to-value (LTV) ratios than during the catastrophic housing bubble of the 2000s.

https://confoundedinterestnet.files.wordpress.com/2018/10/ffpeak.png?w=623&h=335

The “good” news is that the average FICO (credit) score for Fannie and Freddie loan purchases is above those from the housing bubble. But the trend is worrisome.

https://confoundedinterestnet.files.wordpress.com/2018/10/ficoughdd.png?w=623&h=336

In terms of Debt-to-income ratios (or Detes as Tom Haverford would say), the Detes are below housing bubble levels, but have been rising since the end of 2008.

https://confoundedinterestnet.files.wordpress.com/2018/10/ffdetes.png?w=622&h=215

Source: Confounded Interest blog

CNBC: Home Sellers Are Slashing Prices At The Fastest Rate In Over Eight Years

The housing market indicated that a crisis was coming in 2008.  Is the same thing happening once again in 2018? 

For several years, the housing market has been one of the bright spots for the U.S. economy.  Home prices, especially in the hottest markets on the east and west coasts, had been soaring.  But now that has completely changed, and home sellers are cutting prices at a pace that we have not seen since the last recession.  In case you are wondering, this is definitely a major red flag for the economy.  According to CNBC, home sellers are “slashing prices at the highest rate in at least eight years”…

After three years of soaring home prices, the heat is coming off the U.S. housing market. Home sellers are slashing prices at the highest rate in at least eight years, especially in the West, where the price gains were hottest.

It is quite interesting that prices are being cut fastest in the markets that were once the hottest, because that is exactly what happened during the subprime mortgage meltdown in 2008 too.

In a previous article, I documented the fact that experts were warning that “the U.S. housing market looks headed for its worst slowdown in years”, but even I was stunned by how bad these new numbers are.

According to Redfin, more than one out of every four homes for sale in America had a price drop within the most recent four week period…

In the four weeks ended Sept. 16, more than one-quarter of the homes listed for sale had a price drop, according to Redfin, a real estate brokerage. That is the highest level since the company began tracking the metric in 2010. Redfin defines a price drop as a reduction in the list price of more than 1 percent and less than 50 percent.

That is absolutely crazy.

I have never even heard of a number anywhere close to that in a 30 day period.

Of course the reason why prices are being dropped is because homes are not selling.  The supply of homes available for sale is shooting up, and that is good news for buyers but really bad news for sellers.

It could be argued that home prices needed to come down because they had gotten ridiculously high in recent months, and I don’t think that there are too many people that would argue with that.

But is this just an “adjustment”, or is this the beginning of another crisis for the housing market?

https://www.zerohedge.com/sites/default/files/inline-images/2018-09-22_6-12-11.jpg?itok=ytb_mJRX

Just like a decade ago, millions of American families have really stretched themselves financially to get into homes that they really can’t afford.  If a new economic downturn results in large numbers of Americans losing their jobs, we are once again going to see mortgage defaults rise to stunning heights.

We live at a time when the middle class is shrinking and most families are barely making it from month to month. The cost of living is steadily rising, but paychecks are not, and that is resulting in a huge middle class squeeze.  I really like how my good friend MN Gordon made this point in his most recent article

The general burden of the American worker is the daily task of squaring the difference between the booming economy reported by the government bureaus and the dreary economy reported in their biweekly paychecks. There is sound reason to believe that this task, this burden of the American worker, has been reduced to some sort of practical joke. An exhausting game of chase the wild goose.

How is it that the economy’s been growing for nearly a decade straight, but the average worker’s seen no meaningful increase in their income? Have workers really been sprinting in place this entire time? How did they end up in this ridiculous situation?

The fact is, for the American worker, America’s brand of a centrally planned economy doesn’t pay. The dual impediments of fake money and regulatory madness apply exactions which cannot be overcome. There are claims to the fruits of one’s labors long before they’ve been earned.

The economy, in other words, has been rigged. The value that workers produce flows to Washington and Wall Street, where it’s siphoned off and miss-allocated to the cadre of officials, cronies, and big bankers. What’s left is spent to merely keep the lights on, the car running, and food upon the table.

And unfortunately, things are likely to only go downhill from here.

The trade war is really starting to take a toll on the global economy, and it continues to escalate.  Back during the Great Depression we faced a similar scenario, and we would be wise to learn from history.  In a recent post, Robert Wenzel shared a quote from Dr. Benjamin M. Anderson that was pulled from his book entitled “Economics and the Public Welfare: A Financial and Economic History of the United States, 1914-1946”

[T]here came another folly of government intervention in 1930 transcending all the rest in significance. In a world staggering under a load of international debt which could be carried only if countries under pressure could produce goods and export them to their creditors, we, the great creditor nation of the world, with tariffs already far too high, raised our tariffs again. The Hawley-Smoot Tariff Act of June 1930 was the crowning folly of the who period from 1920 to 1933….

Protectionism ran wild all over the world.  Markets were cut off.  Trade lines were narrowed.  Unemployment in the export industries all over the world grew with great rapidity, and the prices of export commodities, notably farm commodities in the United States, dropped with ominous rapidity….

The dangers of this measure were so well understood in financial circles that, up to the very last, the New York financial district retained hope the President Hoover would veto the tariff bill.  But late on Sunday, June 15, it was announced that he would sign the bill. This was headline news Monday morning. The stock market broke twelve points in the New York Time averages that day and the industrials broke nearly twenty points. The market, not the President, was right.

Even though the stock market has been booming, everything else appears to indicate that the U.S. economy is slowing down.

If home prices continue to fall precipitously, that is going to put even more pressure on the system, and it won’t be too long before we reach a breaking point.

Source: by Michael Snyder | ZeroHedge

***

The Real Estate Soufflé
January 30, 2006

We have a decidedly nuanced view of Real Estate: While not neccessarily a bubble, it has been the prime driver of the economy since rates were slashed to half century lows 3 years ago.

Yet Another Sign The Housing Cycle Has Peaked

The early stages of a housing cycle are fun for pretty much everyone. Homeowners see their equity start to rise and feel smart for having bought, home seekers have to pay up, but not too much, and fully expect their new home to keep appreciating. People with modest incomes feel a bit of pinch but can still afford to stick around.

But later on the bad starts to outweigh the good. Existing homeowners still enjoy the ride but would-be buyers find themselves priced out of their top-choice neighborhoods. And residents who aren’t tech millionaires find that they can no longer afford to live where they work. Consider the plight of a teacher or cop pretty much anywhere in California these days:

Housing prices drive Davis teachers out of town. Legislators could give them a break from parcel taxes.

Drew Barclay has a master’s degree in education and three years of experience as an English teacher, but, like most new teachers in Davis, he can’t afford to live there.

Instead, Barclay, 31, shares a rental in Sacramento that costs him $950 a month — about 40 percent of the $2,550 he brings home each month after taxes.

He is so certain that he won’t be able to qualify for a loan for a home in Davis on his $47,000 annual salary that he hasn’t bothered to house hunt. The median price for a house in the city in March was $682,500, according to tracking firm CoreLogic. Renting also is prohibitive, with the average rent in Davis about $2,500 a month, according to Zillow, a real estate website.

Davis Joint Unified officials hope to get a little help from state legislators. Last week, the state Senate voted 24-8 to waive the annual school district parcel tax of $620 for teachers and other employees of the Yolo County school district.

Davis school board member Alan Fernandes said that about two-thirds of the district’s teachers live outside Davis where housing is less expensive. He said the bill would encourage more of the district’s teachers to live in the community they serve.

Davis Joint Unified regularly passes parcel taxes to keep class sizes down and to support classroom programs. In 2016, 71 percent of Davis voters approved Measure H, a yearly tax of $620 on each parcel of taxable real property in the district for eight years. The measure raises $9.5 million a year to support math, reading and science programs and reduced class sizes for elementary grades.

But the roughly $50 a month exemption isn’t likely to help Davis Joint Unified teachers enough to make buying a house affordable. The teachers are some of the lowest-paid educators in the region, with some of the highest health care costs.

Barclay said he knows teachers 10 or 15 years older than he is who are renting rooms in other educators’ homes to get by. He said some teachers have weekend jobs to make enough money to pay their bills.

“Because I’m fairly certain I can’t put down permanent roots here, I don’t see this position as a permanent one,” Barclay said of his job as an English teacher at Davis Senior High School.

California school districts have responded by offering signing bonuses, housing stipends, computers and free tuition to educators who sign up with their districts.

When housing costs reach this point there’s no real fix. Raise taxes to increase teacher pay and there’s political trouble. Cut back on other services and the quality of life declines. “Streamline” the schools and educational outcomes and teacher morale plummet.

There’s a limit, in other words, to the ascent of home prices beyond which the system starts to break down. And when the people who make a town run smoothly – teachers, firefighters, cops, sanitation workers – can no longer afford to live there, that town has clearly crossed the line.

Based on the Case-Shiller home price index, which is now back to its 2007 housing bubble peak, there are a lot more Davis, CAs out there, with all the pathologies that that implies.

https://www.zerohedge.com/sites/default/files/inline-images/2018-05-29_6-04-48_0.jpg?itok=Lh4f9UCG

A housing bubble, of course, is just a symptom of a bigger problem. Easy money distorts the workings of a market economy by causing the prices of many assets to soar beyond all reason, enriching the owners and impoverishing the users. Typically, when housing reaches this point so have stocks and other financial assets, CEO salaries, corporate concentration, political corruption and a long list of other evils that feed on low interest rates and lax lending standards. The confluence of resulting problems then brings the cycle to a noisy end.

Housing says we’re getting close.

Source: ZeroHedge

Home Prices In 80% Of US Cities Grew 2x Faster Than Wages… And Then There Is San Francisco

https://www.zerohedge.com/sites/default/files/inline-images/low%20millions.jpg?itok=fwEIKjoM

The housing market is starting to overheat. Again.

According to the latest BLS data, average hourly wages for all US workers in November rose at a relatively brisk 2.7% relative to the previous year, if below the Fed’s “target” of 3.5-4.5% as countless economists are unable to explain how 4.1% unemployment, and “no slack” in the economy fails to boost wage growth. Another problem with tepid wage growth, in addition to crushing the Fed’s credibility, is that it keeps a lid on how much overall price levels can rise by, i.e. inflation. Meanwhile, with record global debt, it has been the Fed’s imperative to boost inflation at any cost to inflate away the debt overhang, however weak wages have made this impossible.

Well, not really.

Because a quick look at US housing shows that while wages may be growing at roughly 2.7%, according to the latest Case Shiller data, 18 of 20 metro areas in the US saw home prices grow at a higher pace, while 16 of 20 major U.S. cities experienced home price growth of 5.4% or higher, double the average wage growth, and something which even the NAR has been complaining about with its chief economist Larry Yun warning that as the disconnect between prices and wages becomes wider, homes become increasingly unaffordable for most Americans.

https://www.zerohedge.com/sites/default/files/inline-images/Case%20Shiller%20feb%202018_0.jpg?itok=mcLLZHMO

https://www.zerohedge.com/sites/default/files/inline-images/Case%20Shiller%20feb%202018_0.jpg?itok=mcLLZHMO

Confirming the recent jump in home prices, at the national level in February home prices for the Top 20 metro areas soared 6.8% YoY according to Case Shiller, the fastest rate since June 2014…

https://www.zerohedge.com/sites/default/files/inline-images/2018-04-24_6-01-39.jpg

… and hitting a new all time high nationwide.

https://www.zerohedge.com/sites/default/files/inline-images/2018-04-24_6-04-56.jpg

And while this should not come as a surprise – considering we have pointed it out on numerous occasions in the past – one look at the chart below confirms that something very troubling is taking place in San Francisco, which has either become “Vancouver South” when it comes to Chinese hot money laundering, or the second housing bubble has finally arrived on the West Coast. And while according to Case-Shiller data, home prices in San Francisco rose “only” 10.1% Y/Y, a more accurate breakdown of San Fran housing prices from Paragon Real Estate indicates a record 24% annual increase in San Francisco home prices, which increased by $110,000 in just the past quarter.

https://www.zerohedge.com/sites/default/files/inline-images/paragon1.jpg

Behold: a housing bubble…

https://www.zerohedge.com/sites/default/files/inline-images/paragon2.jpg

Also worth keeping an eye on: price appreciation in Sin City has quietly surged in recent months, and in February home prices jumped 11.6% Y/Y, the highest annual increase in years. Considering Las Vegas was the epicenter of the last housing bubble when prices exploded higher only to crash, it may be a good idea to keep a close eye on price tendencies in this metro area for a broader confirmation of the second housing bubble, than just the microcosm that is San Francisco.

* * *

Meanwhile, for those looking to buy for the first time, conditions have never been worse. Growth in property values is outpacing wage gains and limiting affordability, representing a major headwind for first-time buyers, and the broader market.

Finally, putting the above data in context, here are two charts courtesy of real-estate expert Mark Hanson, the first of which shows how much household income increase is needed to buy the median priced home in key US cities…

https://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/08/12/HOUSEHOLD-INCOME-MUST-INCREASE.png

… while the next chart shows the divergence between actual household income, and the income needed to buy the median priced house.

https://www.zerohedge.com/sites/default/files/styles/inline_image_desktop/public/inline-images/divergence-hh-income-vs-hh-cost-to-own.png?itok=eM3GpbaU
Source: ZeroHedge

BOOM: 848 Square Foot Sunnyvale CA Home Shatters Record With $2M Price Tag…

https://www.mercurynews.com/wp-content/uploads/2018/02/sjm-l-sunnyvale-0301-1.jpg?w=810This home on Plymouth Drive in Sunnyvale, Calif. recently set the highest price per square foot ever recorded by the Multiple Listing Service. The two bedroom, two bath home – 848 square feet in size – sold in two days for $2 million. It had been listed for $1.45 million. That means it sold for $2,358 per square foot, which is the highest price per square foot in Sunnyvale recorded by MLS Listings which has data going back to Jan. 1, 2000.

SUNNYVALE — The small, unassuming home in the Cherry Chase neighborhood was on the market just two days before it sold for $2 million, a whopping $550,000 over its asking price.]

In this red-hot real estate market, the price tag barely caused a stir. What did was the other number that turned the home into another Bay Area record-breaker: It sold for the highest square-foot price recorded in Sunnyvale — a stunning $2,358, according to MLSListings, which tracks homes sales going back to 2000.

The jaw-dropping price tag suggests Sunnyvale, which has traditionally been less expensive than neighboring cities Cupertino or Palo Alto, is becoming a real estate destination in itself.

“I was blown away by it,” Doug Larson of Coldwell Banker, the real estate agent who sold the home, said of the price it fetched.

There’s nothing particularly breathtaking about the modest, one-story house on quiet, tree-lined Plymouth Drive. But it sits nestled at the center of one of the country’s most expensive real estate markets. As prices continue to increase throughout the Bay Area, pushing out even some highly paid tech workers, experts say more residents are flocking to relatively affordable Sunnyvale, driving up prices there.

“It’s become the new hot market,” said Jim Harrison, president and CEO of MLSListings.

Homes in Sunnyvale sold for a median price of $1.57 million in January, according to Zillow. That’s affordable compared to neighboring Cupertino, with a median sale price of $2.2 million, or Palo Alto, with a median price of $3 million.

But it may not stay that way for long. So far this year, homes in Sunnyvale are selling for an average of 28 percent over their listed price and are spending just nine days on the market, Harrison said. A four-bedroom, two-bath, 2,000 square foot house in the city recently sold for close to $800,000 over its listing price, fetching $2.47 million.

The Plymouth Drive house is small by comparison, just 848 square feet, which contributed to its high per-square-foot price. But it’s on a large lot — 6,000 square feet. That makes it a prime candidate for the new owner to tear it down and build something else, Harrison said.

Realtor Juliana Lee of Keller Williams, who represents the buyer of the Plymouth Drive home, declined to comment on behalf of herself and her client.

Listing photos of the home show a small, beige house with a huge backyard, hardwood floors and a large front window with white shutters. Before the sale, the most expensive per-square-foot price recorded in Sunnyvale was $2,175, according to MLSListings. That was for a 1,839-square-foot, two-bedroom home on a 36,155 square foot lot, which sold for $4 million.

Sunnyvale has become popular in part because of its proximity to Silicon Valley’s tech jobs, said realtor James Morris of James Morris Homes, which has offices in San Jose and Saratoga. LinkedIn is headquartered in the city, Apple is just next door in Cupertino, and Google is on the other side in Mountain View.

Millennials don’t want to endure long commutes on the Bay Area’s clogged freeways, Morris said.

“They will pay that premium to be close to their jobs and not have to drive,” he said.

When Larson put the Plymouth Drive house on the market on Feb. 7, he asked for $1.45 million and assumed his client would get about $1.6 million. The next day, he opened the house for a realtor tour so the community’s agents could check out the property and determine if it was something their clients might want. It generated a lot of interest, Larson said, with some agents indicating they had buyers willing to offer as much as $1.8 million.

Friday morning, a realtor called Larson and told him she was sending over an offer. Larson told her his client wasn’t accepting offers until the following Wednesday, but the persistent realtor refused to take no for an answer and sent her client’s offer that afternoon.

It was too tempting to pass up — $2 million, all cash, closing in 10 days. The seller was shocked.

“She said, ‘What?’” Larson said. “She was as taken aback as I was.”

https://www.mercurynews.com/wp-content/uploads/2018/02/sjm-l-sunnyvale-0301-2.jpg?w=810

https://www.mercurynews.com/wp-content/uploads/2018/02/sjm-l-sunnyvale-0301-11.jpg?w=810

Pictured is a view of the kitchen inside a home on Plymouth Drive in Sunnyvale, Calif. which recently set the highest price per square foot ever recorded by the Multiple Listing Service. The two bedroom, two bath home - 848 square feet in size - sold in two days for $2 million. It had been listed for $1.45 million. That means it sold for $2,358 per square foot, which is the highest price per square foot in Sunnyvale recorded by MLS Listings which has data going back to Jan. 1, 2000. (Courtesy Michael Silver)

Pictured is a view of the kitchen inside a home on Plymouth Drive in Sunnyvale, Calif. which recently set the highest price per square foot ever recorded by the Multiple Listing Service. The two bedroom, two bath home - 848 square feet in size - sold in two days for $2 million. It had been listed for $1.45 million. That means it sold for $2,358 per square foot, which is the highest price per square foot in Sunnyvale recorded by MLS Listings which has data going back to Jan. 1, 2000. (Courtesy Michael Silver)

Pictured is a view of the kitchen, looking out toward the back yard and patio of a home on Plymouth Drive in Sunnyvale, Calif. which recently set the highest price per square foot ever recorded by the Multiple Listing Service. The two bedroom, two bath home - 848 square feet in size - sold in two days for $2 million. It had been listed for $1.45 million. That means it sold for $2,358 per square foot, which is the highest price per square foot in Sunnyvale recorded by MLS Listings which has data going back to Jan. 1, 2000. (Courtesy Michael Silver)

Pictured is the livingroom of the home on Plymouth Drive in Sunnyvale, Calif. which recently set the highest price per square foot ever recorded by the Multiple Listing Service. The two bedroom, two bath home - 848 square feet in size - sold in two days for $2 million. It had been listed for $1.45 million. That means it sold for $2,358 per square foot, which is the highest price per square foot in Sunnyvale recorded by MLS Listings which has data going back to Jan. 1, 2000. (Courtesy Michael Silver)

Source: The Mercury News

U.S. Cities with the Most Magnificent Housing Bubbles

But some flat spots are showing up!

Just after Wolf Richter reported on the minuscule 1.4% year-over-year growth of per-capita “real” disposable income and the lowest saving rate in 12 years — for the lucky ones — there’s another asset-bubble doozie: The S&P CoreLogic Case-Shiller National Home Price Index for November, released this morning, rose 6.2% year-over-year (not-seasonally-adjusted). The index has now surpassed by 6.1% what was afterwards called the crazy peak of Housing Bubble 1 in July 2006 and is up 46% from the bottom of Housing Bust 1:

https://wolfstreet.com/wp-content/uploads/2018/01/US-Housing-Case-Shiller-National-Index-2018-01-30.png

Real estate prices are a result of local dynamics but are also impacted by national and global factors, including monetary policies and foreign non-resident investors trying to get their money out of harm’s way. This causes local housing bubbles, operating on their own schedules. When enough of them occur simultaneously, it becomes a national housing bubble. See chart above.

The Case-Shiller Index is based on a rolling three-month average; today’s release was for September, October, and November data. Instead of median prices, the index uses “home price sales pairs,” for example for a house that sold in 2010 and then again in 2017. The index provider incorporates other factors and uses algorithms to adjust the price movement into an index data point. The index was set at 100 for January 2000. An index value of 200 means prices as figured by the algorithm have doubled since then.

Here are the most magnificent leaders among the housing bubbles in major metro areas:

Boston:

The index for the Boston metro area edged down again on a monthly basis, the second decline in a row after 22 months in a row of increases. It has essentially been flat for four months but is still up 6.3% year-over-year. The slight monthly decline could be within the normal seasonal variations but there were no seasonal variations during the relentless surge in 2016 and 2015. During Housing Bubble 1, from January 2000 to October 2005, the index for Boston soared 82% before plunging. The index now exceeds the peak of Housing Bubble 1 by 12.5%:

https://wolfstreet.com/wp-content/uploads/2018/01/US-Housing-Case-Shiller-Boston-2018-01-30.png

Seattle:

The Case-Shiller home price index for the Seattle metro ticked up a smidgen on a month-to-month basis, after the first two back-to-back declines since the end of 2014! It has now been flat for the past five months. However, flat spots or slight declines in the index this time of the year were not unusual before 2015. The index is up 12.7% year-over-year, 20% from the peak of Housing Bubble 1 (July 2007), and 79% from the bottom of Housing Bust 1 in February 2011:

https://wolfstreet.com/wp-content/uploads/2018/01/US-Housing-Case-Shiller-Seattle-2018-01-30.png

Denver:

The index for the Denver metro ticked up again on a monthly basis, the 25th increase in a row. It is up 7.0% year-over-year and has surged 45% above the prior peak in July 2006. Instead of the craziness of Housing Bubble 1, Denver experienced more “normal” home-price increases, and was therefore also spared the ravages of Housing Bust 1. But in 2012, Housing Bubble 2 erupted in full force:

https://wolfstreet.com/wp-content/uploads/2018/01/US-Housing-Case-Shiller-Dener-2018-01-30.png

Dallas-Fort Worth:

The index for the Dallas-Fort Worth metro ticked up again on a monthly basis — the 46th month in a row of increases. It is up 7.0% year-over-year and 43% from the prior peak in June 2007. Like Denver, Dallas experienced saner times during Housing Bubble 1. But prices began to surge relentlessly in 2012:

https://wolfstreet.com/wp-content/uploads/2018/01/US-Housing-Case-Shiller-dallas-2018-01-30.png

Atlanta:

The home price index for the Atlanta metro has now been flat (actually down a tiny bit) for three months in a row, in line with prior seasonal declines, but is still up 5.2% year-over-year and 2.6% above the peak of Housing Bubble 1 in July 2007. From that peak, the index plunged 37%. It’s now up 70% since February 2012:

https://wolfstreet.com/wp-content/uploads/2018/01/US-Housing-Case-Shiller-Atlanta-2018-01-30.png

Portland:

The Case-Shiller index for Portland was flat in November, and has now been flat or slightly down for five months in a row, and for now still in the range of normal seasonal patterns. The index is up 6.9% year-over-year and has skyrocketed 73% in five years. It’s 20% above the crazy peak of Housing Bubble 1 and has ballooned 123% since 2000:

https://wolfstreet.com/wp-content/uploads/2018/01/US-Housing-Case-Shiller-Portland-2018-01-30.png

San Francisco Bay Area:

The index for “San Francisco” covers the county of San Francisco plus four other Bay Area counties — Alameda, Contra Costa, Marin, and San Mateo (the northern part of Silicon Valley). It jumped 1.4% for the month, after jumping 1.2% in the prior month. It’s up 9.1% year-over-year, up 31.3% from the insane peak of Housing Bubble 1, and up 85% from the end of Housing Bust 1. The index has surged 151% since 2000:

https://wolfstreet.com/wp-content/uploads/2018/01/US-Housing-Case-Shiller-San-Francisco-Bay-Area-2018-01-30.png

Los Angeles:

Home prices in the Los Angeles metro, as tracked by the index, rose 0.7% for the month, and 7.0% year-over-year. LA’s Housing Bubble 1 was in a category of its own in its steepness on both sides, with home prices skyrocketing 174% from January 2000 to July 2006, before collapsing and surrendering much of the gains. The index has skyrocketed since Housing Bust 1 and is now within a smidgen of the prior insane peak:

https://wolfstreet.com/wp-content/uploads/2018/01/US-Housing-Case-Shiller-Los-Angeles-2018-01-30.png

New York City Condos:

Case-Shiller has a special index for New York City’s condo because this is such a vast market. And this index rose another notch in November and is up 4.4% year-over-year. The index soared 131% from 2000 to February 2006 during Housing Bubble 1, barely deflated during the bust before QE unleashed money from around the world which then re-floated Wall Street more than anything else. The index is 18% above the peak of Condo Bubble 1 and has nearly tripled over the past 17 years:

https://wolfstreet.com/wp-content/uploads/2018/01/US-Housing-Case-Shiller-New-York-condos-2018-01-30.png

This is asset-price inflation at work — now that “homes” have become a global asset class. These homes didn’t get 50% bigger or 50% nicer over the past few years. Instead the purchasing power of the dollar with regards to these assets has been purposefully demolished by the Fed’s monetary policies that resulted in practically no wage inflation, moderate consumer price inflation, but massive asset-price inflation. Asset-price inflation without corresponding wage inflation means that the value of labor (wages earned) with regards to homes and other assets has been crushed — a phenomenon now hypocritically called the “affordability crisis” in many big urban areas in the US.

Source: By Wolf Richter | Wolf Street