Is a New Bubble Forming?
Posted by Harold Simon on February 27, 2013
[Cue the Darth Vader music].
Are we slipping into a new housing bubble? (Or is it racing into?)
S&P/Case-Shiller Home Price Indices track housing price changes in 20 metros nationwide. Their latest report shows an overall gain of a heady 6.8 percent. Some metros saw considerably more. Phoenix gained a whopping 23 percent (OK, they were down an awful lot to begin with) but six other metros saw double-digit gains. Only the New York metro bucked the trend with a drop of 0.5 percent.
It is difficult to believe that there is not a substantial element of speculation in this sharp run-up in prices. In several of these cities, most notably Atlanta and Phoenix, the bottom tier of the market had been badly beaten up in the crash. Still, it seems implausible that this sharp of a price rise is reflective of the fundamentals of the market. There has to be a real concern that this is yet another short-term run-up that will end badly for many of those caught up in it.
No doubt the housing market is improving in many ways and places. But these data make me think of that old saying — fool me once, shame on you, fool me twice…
(Housing Bubble illustration, via Paul Graham Raven, CC BY-NC-SA.)
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Harold Simon is executive director of the National Housing Institute and publisher of Shelterforce. Email Harold at email@example.com