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Houses Were Cheaper at the Height of the Subprime Bubble Than They Are Now

Business Insider  ( Original )
JUN 1, 2018

The Everything Bubble has made the inflation of the second housing bubble, now well further into its mania stage than the subprime bubble got, go largely unnoticed.

As ZIRP, QE, and the resultant wild risk-asset inflation has combined with government-backed housing loans and predatory lending, the housing crescendo has been fast and furious.

As highlighted by Wolf Richter over at Business Insider, with rising rates, tapped-out consumers, and a refi market that is deader than dead with mortgage rates at five-year highs, where will new buyers and higher prices come from?

Prices of houses and condos across the US surged 6.5% from a year earlier (not seasonally-adjusted), according to the S&P CoreLogic Case-Shiller National Home Price Index for March, released today. The index is now 7.8% above the crazy peak of "Housing Bubble 1" in July 2006 just before it all came apart, and 48% above the trough of "Housing Bust 1":

Real estate is local though prices are heavily impacted by national and global factors, including monetary policies and offshore investors who consider "housing" in the US an asset class and perhaps also escape route.

These local and global factors inflate local housing bubbles. When enough local housing bubbles come together at the same time, even as some housing markets remain calm, they turn into a national housing bubble.

The Case-Shiller Index is based on a rolling three-month average; today's release is for January, February, and March. The index, based on "home price sales pairs," compares the sales price of a home in the current month to the last transaction of the same home years earlier.

The index, which incorporates other factors and uses algorithms to arrive at a data point, was set at 100 for January 2000; so an index value of 200 means prices as figured by the index have doubled.


ORIGINAL SOURCE: Mini housing bubbles are forming in cities all over the US by Wolf Richter at Business Insider on 5/30/18