The Most Splendid Housing Bubbles in America Deflate

The Most Splendid Housing Bubbles in America Deflate by Wolf Richter – Wolf Street
Seattle home prices drop at fastest pace since Housing Bust 1. Feeble declines in San Francisco, Denver, Portland, etc. Flat prices in others. Condo prices in NY City suddenly jump.

Single-family house prices in the US, according to the S&P CoreLogic Case-Shiller National Home Price Index, were essentially flat on a month-to-month basis in September, and rose 5.5% compared to a year ago (not seasonally-adjusted). This year-over-year growth rate is below 6% for the second month in row, after having been above 6% all year. This leaves the index 11.5% above the July 2006 peak of “Housing Bubble 1” in this millennium, which came to be called “bubble” and “unsustainable” only after it had begun to implode during “Housing Bust 1”:

The index is a measure of inflation — not of consumer price inflation but of asset price inflation, specifically house-price inflation. It shows to what extent the dollar is losing purchasing power with regards to buying the same house over time.

The fundamentals of the hottest housing markets around the country have been weakening for months, with declining sales and rising inventories. On the West Coast, this inflection point occurred in July. Prices in those markets, as tracked by the Case-Shiller Index, are gradually reflecting the new reality. But “gradually” is not the right word for formerly piping-hot Seattle, where prices are now dropping at the sharpest rate since Housing Bust 1.

So here are the most splendid housing bubbles in major metro areas in the US:


House prices in the Seattle metro dropped 1.3% in September from prior month, after having dropped 1.6% in August, and 0.5% in July, according to the Case-Shiller Home Price Index. Over those three months, the index dropped 3.5%, the sharpest such decline since December 2011, during Housing Bust 1. So home prices are beginning to unwind a historic spike. The index is now below where it had been in April. This confirms that the inflection point — when the direction changes — was in July and that conditions have deteriorated since.

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Wolf Richter

In his cynical, tongue-in-cheek manner, he muses on WOLF STREET about economic, business, and financial issues, Wall Street shenanigans, complex entanglements, and other things, debacles, and opportunities that catch his eye in the US, Europe, Japan, and occasionally China. WOLF STREET is the successor to his first platform… TP-Title-7-small-200px …whose ghastly name he finally abandoned in July 2014. Here’s the story on that. Wolf lives in San Francisco. He has over twenty years of C-level operations experience, including turnarounds and a VC-funded startup. He earned his BA and MBA in Texas and his MA in Oklahoma, worked in both states for years, including a decade as General Manager and COO of a large Ford dealership and its subsidiaries. But one day, he quit and went to France for seven weeks to open himself up to new possibilities, which degenerated into a life-altering three-year journey across 100 countries on all continents, much of it overland. And it almost swallowed him up.