Housing bubble 2.0? Regional housing markets are ...

When the U.S. housing bubble burst more than a decade ago, it brought the global economy to its knees. It turned out that the multiyear ... U.S.marketsopenin35minutesS&PFutures4,032.50+45.00(+1.13%) DowFutures32,452.00+291.00(+0.90%) NasdaqFutures12,414.75+221.00(+1.81%) Russell2000Futures1,781.70+21.30(+1.21%) CrudeOil102.60-0.49(-0.48%) Gold1,861.10+2.50(+0.13%) Silver21.83+0.04(+0.20%) EUR/USD1.0555-0.0006(-0.05%) 10-YrBond2.9690-0.1100(-3.57%) Vix33.01+2.82(+9.34%) GBP/USD1.2325-0.0005(-0.04%) USD/JPY129.9630-0.4000(-0.31%) BTC-USD31,972.84-1,069.39(-3.24%) CMCCrypto200747.41-32.97(-4.22%) FTSE1007,285.24+68.66(+0.95%) Nikkei22526,167.10-152.24(-0.58%) ReadfullarticleLanceLambertMay9,2022,3:31PM·7minreadWhentheU.S.housingbubbleburstmorethanadecadeago,itbroughttheglobaleconomytoitsknees.Itturnedoutthemulti-yearhousingboomthroughtheearly2000swashidingskeletons.Homebuyers,drivenbyafearofmissingoutonhomepricegains,werestretchingthemselveswellbeyondtheirfinancialmeans.Whilezealouslendersweregivingoutmortgages(orbetterput,subprimemortgages)tofolkswhohistoricallywouldn'thavequalified.Asthatcreditrushedin,ithelpedtodrivethehousingboom.However,asthehousingmarketcorrected,thosebadloanscreatedaforeclosurecrisisthattookmanyofthenation'sbiggestfinancialfirms,likeBankofAmericaandCitigroup,totheirbrink.Fast-forwardtotoday,wheretheU.S.housingmarketisonceagaingoingthroughahistorichousingboom.Overthepasttwoyears,U.S.homepricesareup34.4%—includinga19.8%jumpoverthepast12months.That12-monthhikeismorethanfour-timesgreaterthanthehistoricannualaverage(4.6%)postedsince1987.It'salsowellabovethelargest12-monthpricejump(14.7%)postedintheyearsleadinguptothe2008financialcrisis.Ourongoinghousingboomhasmoreeconomistsponderingthemostfearedwordinrealestate:Bubble.BackinMarch,researchersattheFederalReserveBankofDallasputchillsdownthespinesofhomebuildersandrealestateagentswhentheyreleasedapapertitled"Real-timemarketmonitoringfindssignsofbrewingU.S.housingbubble."TheDallasFedresearchersfoundhomepriceswerebecomingdetachedfromeconomicfundamentals(i.e.householdincomes).However,ifahousingcorrectiondoescometopass,theDallasFedresearchersdon'tthinkit'dcausemacroeconomicissueslikewesawfromthelastbubble.Unlikethelastgoaround,theywrite"householdbalancesheets[today]appearinbettershape,andexcessiveborrowingdoesn’tappeartobefuelingthehousingmarketboom."StorycontinuesThatsaid,someregionalhousingmarketscouldbeinfull-blownhousingbubbles.Attheveryleast,manymarketsarepricedexorbitantlycomparedtowhatlocalincomelevelscansupport.That'swhatFortunefoundafterlookingatananalysisbytheRealEstateInitiativeatFloridaAtlanticUniversity.Eachmonth,researchersattheuniversitycalculatehowoverpricedorunderpricedhomepricesareinAmerica's100largesthousingmarkets.Intheirownwords,here'showtheFloridaAtlanticUniversityresearcherssaytoreadtheirhousinganalysis:"Apositivescorerepresentsapremium,implyingthattheaveragepropertyinametroissellingaboveitshistoricalimpliedprice.Anegativescorerepresentsadiscount,implyingthattheaveragepropertyinametroissellingbelowitshistoricalimpliedprice."Now,let'slookatthedata.ViewthisinteractivechartonFortune.comAtthelatestreadinginMarch,FloridaAtlanticUniversityresearchersfoundeveryoneofAmerica's100largesthousingmarketswereoverpricedrelativetowhateconomicfundamentalsinthemarketwouldsupport.Thatincludes44marketsthatareoverpricedbyatleast30%.While13marketsareoverpricedbyatleast50%.ThemostoverpricedmarketsareBoise(overpricedby75%);Austin(66%);Ogden,Utah(63%);LasVegas(60%);andAtlanta(60%).Thoseplaceshaveallseenaninfluxofnewresidentsamidthepandemic's"workfromanywhere"boom.That,inpart,explainswhyhomepricestherehavesoaredwellabovewhatlocalincomescanafford.Italsoraisesthequestion:Ifa2023recessiondoescome,andemployersfinallyhavetheeconomicpowertoforcestaffersbackintotheoffice,willthosehousingmarketsbeatahigherriskofahomepricecorrection?Tofindthehousingmarketsthatarethemostfairlypricedrelativetohouseholdincomes,justlookfortheplacesthatsawanexodusofworkersduringthepandemic.Caseinpoint:ThemetrosofNewYorkCityandSanFranciscoareoverpricedbyjust3%and13%,respectively.MarkZandi,chiefeconomistatMoody'sAnalytics,doesn'tforeseeahousingbustoverthecomingyear.However,hesays"overvalued"housingmarketscouldseehomepricesfall5%to10%overthenext12monthswhilenationalhomepricegrowthflatlinestozero.Why?Theeconomicshockcausedbyspikingmortgageratesthisyear,hesays,shouldfinallyreinintherateofhomepricegrowth.We'realreadyseeingsignsofacoolinghousingmarket.WhileMoody'sAnalyticsownresearchfinds96%ofhousingmarketsareovervalued,Zandiwon'tcallthisahousingbubble.Inorderforittobeahousingbubble,itwouldneedbothhomepriceovervaluationandspeculationinthemarket.UnliketheFOMOdriven2000shousingmarket,Zandidoesn'tthinkspeculationisdrivingourongoingboom.ViewthisinteractivechartonFortune.comWhat'snotableabouttheongoinghousingboomisthewhiplash.Justtwoyearsago,thehousingmarketwasreasonablypricedrelativetoincomes(seechartabove).InMarch2020,onlyninehousingmarketswereoverpricedbyover10%,accordingtoFloridaAtlanticUniversity'scalculation.Backthen,Spokane,Wash.(overpricedby26%)wasthemostoverpricedhousingmarket.AsofMarch2022,Spokaneisnowoverpricedby55%—whichdoesn'tevenputitinthetopfive—while90outofthenation's100largestmarketsareoverpricedby10%ormore.Atfirstglance,onemightassumetheCOVID-19recessiondraggeddowntheMarch2020numbers.Itdidn't.TheratioscreatedbyresearchersatFloridaAtlanticUniversitywereessentiallythesameinJanuary2020asinMarch2020.Simplyput:March2020isagoodpointofreference.ThedifferencebetweenMarch2020andMarch2022speakstohowhistoricallyfiercethehousingmarkethasbeenduringthepandemic.Inamatteroftwoyears,we'veflippedfromanormalhousingmarketintoonethatishistoricallyoverpriced.ViewthisinteractivechartonFortune.comInordertofindahousingmarketthatcloselyresemblesthecurrentmarket,you'dhavetotravelbacktotheyearsleadingintothe2008housingcrash.BackinMarch2007,99ofthenation's100largesthousingmarketswereoverpriced.While40marketswereoverpricedbyatleast30%,and19marketswereoverpricedbyatleast50%.Whilethetop-linenumbersinMarch2022andMarch2007areeerilysimilar,thereisonestrikingdifference.In2007,manyofthenation'smostoverpricedhousingmarketswereinCalifornia,NewYork,andFlorida.Thistime,Floridahasaheavyconcentrationofoverpricedmarkets,however,CaliforniaandNewYork(whichhavebothseenanuptickinout-migrationduringthepandemic)rankmuchlower.LooknofurtherthanLosAngeles.InMarch2007,itwasoverpricedby62%.AsofMarch2022,LosAngelesisoverpricedby10%.ViewthisinteractivechartonFortune.comThelasthousingbubblewasanythingbuteven.Asthehousingmarketcrashedthrough2008,overpricedmarketslikePhoenixandLasVegasgotabsolutelycrushed.Notonlywerehomepricesinthosemarketsbooming,sowasnewconstruction.Butasthemarketslumped,PhoenixandLasVegasbecameoversuppliedwithnewsprawlingsubdivisions.Thatoversupplydrovehomepricesdownfaster,andmadetheforeclosurecrisisinthosemarketsevenworse.Thistimearound,PhoenixandLasVegasareonceagainamongthemostoverpricedhousingmarkets.InMarch2007,PhoenixandLasVegaswereoverpricedby59%and72%,respectively.InFloridaAtlanticUniversity'slatestreading,thosetwomarketsarenearingtheirprevioushighs.AsofMarch2022,Phoenixisoverpricedby55%whileLasVegasisoverpriced60%.Evenworse:PhoenixisonceagainamongtheU.S.leadersfornewconstruction.Ifahousingcorrectiondoescome,Phoenixcouldquicklybecomeoversupplied.Ifyou’rehungryformorehousingdata,followmeonTwitterat@NewsLambert.ThisstorywasoriginallyfeaturedonFortune.com1.OilSwingsAmidEU’sPushforRussiaSanctionsandEconomyRisks2.ColonialallocatesCycle28shipmentsondistillateLine203.JPMorganLaunchesDataPlatformforBuySideFacingDeluge4.Lufthansaseesnosignificantrestructuringcostsin20225.Goldman’sOppenheimerSeesValuein$11TrillionStockRoutMarketWatchWehave$5millioninsavingsandearnnearly$7,000amonth.Shouldwespendover$2.1milliontobuildourdreamhome?'Includingland,itwouldbecloseto$3millioninvalue.Weareretiredandthiswouldbeourforeverhomeandaninvestment.'9hagoMarketWatchFedofficialsayshedoesn’tbuythe‘GreatResignation’—andsaysemployers‘alwayssay’there’salaborshortagetoavoidpayinghigherwagesMinneapolisFedPresidentNeelKashkarisaidpeoplearereallyleavingtoughbutimportantjobsformoreattractiveoptions.18hagoMotleyFoolWhyEveryone'sMakingSuchaBigDealAboutHousingInventoryToday'shousingmarketisanextremelydifficultonetonavigate.Granted,that'sprettymuchbeenthecasesincemid-2020.ButwhereasmortgageratesdroppedtorecordlowsontheheelsoftheCOVID-19outbreak,they'renowsittingattheirhighestlevelsin13years.2hagoWJAX‘We’regoingtolosethishouse’:DuvalhomeownersstruggletokeepupwithpropertyinsurancehikesMorethan820,000FloridiansarenowgettinghomeinsurancethroughCitizens,thestate’sinsureroflastresort.16hagoTravel+LeisureThisStunningCaribbeanIslandHasWhite-sandBeaches,aNationalPark,andanEpicUnderwaterTrailforSnorkelersTheislandissometimescalledthe"BeverlyHillsoftheCaribbean."14hagoMoneyWiseHomesellerssnapupmoreall-cashoffers—waystocompetewhenyou'rebuyingwithamortgageCashoffersturnuptheflamesinalready-heatedrealestatemarket16hagoMarketWatchTheDowandtheS&P500arelikelyfallingintoabearmarketbutyourportfoliodoesn’thavetosinkwiththemMostinvestors---includingmanymoneymanagers---haveneverexperiencedthedestructivenatureofabearmarket.1dagoYahooFinanceUKProperty:MyhouseearnsmorethanmeRisinghousepricesmeanthatsomehomesareincreasinginvaluebymorethantheirownersearnannually.1dagoYahooSportsCanadaT.J.Oshie'scontroversialhitleadstoCapitalsgoal,almostcostsPanthersgameItlookedlikethegoalthathappenedimmediatelyfollowingOshie'shitwasgoingtoholdupasthegame-winner.10hagoYahooFinanceVideoFordreportedlysellsRivianstockatadiscountYahooFinanceLive'sAkikoFujitadiscussesRivianstockafteritwasreportedthatFordisselling8millionsharesoftheEVstartup.21hagoTheTelegraphRussiaadmitsitfaceseconomiccollapseoverPutin’swarRussia'seconomyhasplungedintoitsworstcrisisforalmostthreedecadesasthecountryisbatteredbyWesternsanctions,aleakedcopyoftheKremlin'sownforecastsshows.1dagoYahooFinanceUKCostoflivingcrisis:HowtocutthecostsofchildcareFromclaimingtax-freechildcaretogettingthegrandparentsinvolved,findouthowtocutchildcarecosts.2dagoGOBankingRates20HomeRenovationsThatWillHurtYourHome’sValueJustbecauseyouseesomethingasanimprovementdoesn'tmeanapotentialbuyerwillfe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