The Most Splendid Housing Bubbles in America: Nov. Update

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by Wolf Richter, Wolf Street:

A pandemic of house price inflation.

House prices jumped 7.0% across the US, according to the Case-Shiller Home Price Index released today. Other indices have indicated similar price surges. House prices are going nuts despite a terrible economy. They’re being fired up by low interest rates, $3 trillion in liquidity that the Fed threw at the markets, fear of inflation that drives people into hard assets, work-from-home that causes people to look for a larger place, the urge to-buy-now before putting the current home on the market, and a shift from rental apartments and condos in high-rise buildings to single-family houses. And condos, as we’ll see in a moment, are not universally hot.

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Los Angeles House Prices:

House prices in the Los Angeles metro in September jumped by 1.3% from August and by 7.7% from September last year. They’re now 12.9% above the peak of the totally crazy Housing Bubble 1, have nearly doubled (+93%) since early 2012, and having more than tripled since January 2000 (+209%):

The Case-Shiller index was set at 100 for January 2000 across all 20 cities it covers. Today’s index value for Los Angeles of 309 means that house prices have surged 209% since January 2000. This makes Los Angeles the most splendid housing bubble on this list.

For Los Angeles, the Case-Shiller Index provides sub-indices for condos, and for high-, mid-, and low-tier segments of houses. In the low-tier segment (black line) – where people can least afford price increases – prices shot up 10.2% from September last year, having nearly quadrupled since January 2000 (+280%). During Housing Bubble 1, the low-tier surged the most, and during the Housing Bust, it plunged the most, -56% from peak to trough. High-tier prices (green line) have risen 7.6% year-over-year and are up 186% from January 2000:

The Case-Shiller Home Price Index avoids some of the distortions inherent in median-price and average-price indices because it is based on “sales pairs,” comparing the sales price of a house that sold in the current month to the price of the same house when it sold previously, and it does so going back decades. Today’s release for “September” is a rolling three-month average of closings that were entered into public records in July, August, and September. So that’s the timeframe we’re looking at.

San Diego House Prices:

The Case-Shiller Index for the San Diego metro jumped 1.8% in September from August and was up 9.5% from a year ago:

This is “House-Price Inflation”: Loss of purchasing power of the dollar.

Because the Case-Shiller Index compares the sales price of a house in the current month to the price of the same house when it sold previously, it tracks how many dollars it takes over time to buy the same house. In other words, it measures the purchasing power of the dollar with regards to houses. This makes the Case-Shiller Index a measure of “house-price inflation.” And that’s all this really is – the loss of purchasing power of the dollar with regards to houses.

San Francisco Bay Area:

House prices in the five-county San Francisco Bay Area – the counties of San Francisco, San Mateo (northern part of Silicon Valley), Alameda and Contra Costa (East Bay), and Marin (North Bay) – rose 1% in September from August and 6.0% from a year ago. The index has more than doubled since 2012 and nearly tripled since 2000:

But condo prices in the five-county Bay Area fell for the fourth month in a row and are down 2.3% from a year ago, and are back where they’d first been in March 2018. Condo prices in San Francisco itself have fallen much further amid a historic all-time record condo glut, with the median price down 12.8% year-over-year. But the Case-Shiller Index covers a vast area around the Bay, including those where San Francisco refugees are moving to, and some of them are seeing rising condo prices:

Seattle House Prices:

The Case-Shiller Index for the Seattle metro jumped 1.2% in September from August and 10.1% year-over-year. It has more than doubled since 2012 and exceeds the Housing Bubble 1 peak by 46%:

New York Condo Prices:

Case-Shiller’s area for its New York City index includes numerous counties in the states of New York, New Jersey, and Connecticut “with significant populations that commonly commute to New York City for employment purposes.” This area is far more diverse than Manhattan by itself. Condo prices in this vast metro have essentially been flat since September 2017 and are down 2% from the peak in October 2018:

Portland House Prices:

House prices in the Portland metro jumped 1.3% in August from September and 7.6% year-over-year and have doubled since 2012:

Miami House Prices:

House prices in the Miami metro rose 1.0% in September from August and by 5.6% from a year ago. The index is getting closer to its ludicrous Housing Bubble 1 high, lacking just 7.4%:

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