Are We In A Bubble? No, Not Now

[NachoPerito]

We had a bubble a decade ago so we have good data for what a bubble is so let's compare.

The calculated risk blog tracks the ratio of Home prices to the National Wage Index.
https://www.calculatedriskblog.com



The graph shows that prices are 5-10% higher than normal, but not 35% above normal in 2006.

But, it doesn't take into account interest rates. I couldn't find a national analysis for this, but Seattle is a good visual representative that uses interest rates. I got this data from the Seattle Bubble.
https://seattlebubble.com


In 2007 homes were 53% above what a typical person could afford, Bubble! The graph shows that in February 2018 we were 13.5% above. More recent data from June with rising interest rates and home prices puts it at 29% above affordable.

This is certainly reaching the point of a small bubble, but nothing like 2006 yet. Next year if we are sitting in this same place where interest rates have gone up a half point and home prices have gone up 10% YOY then it should be bubble talk time.

 

[Michigan CG]

Very interesting, thanks for sharing.

 

[Addie]

But we are way above the 1980’s recession we’re there were no jobs to be found.

So what’s that say? I’d say, it says, we are on a blue marble spinning in space. Looking at charts is a fools errand. Not enough people to matter predict anything. This is predictable.

 

[Elliott]

Graphs are overrated in their predictive properties. They are really great for historical purposes. Tomorrow the graph can go the other direction because there is always the unexpected.

 

[TJSum]

"But it does not take into account interest rates". Seems to be the fatal flaw in your study as this "bubble" has used historic low interest rates as rocket fuel.

 

[Joe Flacco]

Shortage

 

[Tim The Enchanter]

But we are way above the 1980’s recession we’re there were no jobs to be found.

So what’s that say? I’d say, it says, we are on a blue marble spinning in space. Looking at charts is a fools errand. Not enough people to matter predict anything. This is predictable.

In 1982 I had 7 W2 forms. There were jobs to be found, just they all sucked.

 

[Michigan CG]

Looking at charts is a fools errand.

Your statement is foolish.

 

[NachoPerito]

"But it does not take into account interest rates". Seems to be the fatal flaw in your study as this "bubble" has used historic low interest rates as rocket fuel.

2nd Graph takes into account interest rates

 

[NachoPerito]

Graphs are overrated in their predictive properties. They are really great for historical purposes. Tomorrow the graph can go the other direction because there is always the unexpected.

There was a reason why SeattleBubble was able to call the last housing bubble: graphs