Are We In A Bubble? No, Not Now

[Doug Wegener]

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

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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

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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.

Bubble or not the real estate market is in trouble

https://www.nationalmortgagenews.com/news/housing-bubble-or-not-the-real-estate-market-is-in-trouble


Time will tell but sales are down. I am personally not buying now. Timing is everything in life.

 

[CompCheck]

It really is as simple as the Fed raising rates. That is why you see a spike reminiscent of 2008 but this time it is held in check.. at least for now. I guess I would add not dropping qualifications any lower as well which will be the x factor.

But you can also see why it feels like a bubble. That spike was on the same trajectory and we are not in the clear yet.

 

[Tim The Enchanter]

I don't suppose the one I'm looking at now is too bubbly.
Sale north of $460k, borrower put down princely sum of 100 bones.
Five figure credit from seller to buyer for closing costs.