The Most Splendid Housing Bubbles in America: “House-Price Inflation” in all its Glory. March Update
The dollar’s purchasing power is falling, but the CPI ignores house price inflation.
By Wolf Richter for WOLF STREET.
Real estate prices increased by 11.2% compared to the previous year. This is the largest increase since Housing Bubble 1 peaked in 2006, according to today’s National Case-Shiller Home Price Index for January.
The index is a good measure of “house price inflation” as it is based on the “sell pair” method and compares the selling price of a house in the current month to the price of the same house when it was previously sold, in the amount of dollars it would take to get the same House to buy over time.
However, house price inflation is not included in the Bureau of Labor Statistics consumer price index. While around a third of the CPI is based on housing costs, only rents and not property prices are recorded. Even the CPI for “home owner’s equivalent home rental,” which is roughly 25% of the CPI, is based on homeowners’ estimates of how much their home would rent. This CPI for the “equivalent residential rent of the owner” rose by only 2.0% year-on-year (green line), compared with the Case-Shiller index, which rose by 11.2% (red line).
The Case-Shiller Index was set at 100 for January 2000. So the national index value of 236 shows that house prices have increased 136% since January 2000, including the slump in the middle where the CPI for homeowners has only increased 72% year over year in the same interval. But for many cities, prices have risen much faster, as we’ll see in a moment.
So you know what’s going on here: the cost of home ownership is rising, but only part of it is included in our inflation measures, which turns the CPI, as an estimate of the dollar’s loss of purchasing power, into a sad joke.
Los Angeles – the grandest # 1 real estate bubble:
Single-family home prices on the Los Angeles subway rose 1.0% in January versus December and 10.8% year-over-year, according to the Case-Shiller Index. The index value for Los Angeles of 321 indicates that housing prices in the subway have increased by 221% since January 2000, which has more than tripled in 20 years. That makes Los Angeles the grandest real estate bubble on this list. Earlier today I discussed the various avenues of condominium and property pricing by price tier.
All of the following charts are on the same scale as Los Angeles. If we go through the list, the amount of white space above the price range grows, showing that the other metros have seen less house price inflation than Los Angeles since 2000, even though there was plenty.
The Case-Shiller index for the San Diego subway rose 1.4% in January versus December and a whopping 14.2% year over year. Prices have more than tripled since 2000 (+ 202%):
House prices on the Seattle subway rose 1.4% in January versus December and 14.3% year over year. This makes it the second fastest annual property price inflation among the Splendid Housing Bubbles after Phoenix (15.8%, including):
San Francisco Bay Area:
Here, condo prices fell back to 2018 levels, but single-family home prices rose 0.2% in January versus December and 9.5% year-over-year, after nearly tripling since 2000 in counties across the Bay Area of San Francisco, San Mateo (northern part of Silicon Valley), Alameda and Contra Costa (East Bay) and Marin (North Bay):
Property prices on the Miami subway rose 1.2% for the month and 10.4% year over year. Though they’re up 173% since 2000, they stay just a little bit below the insane peak of Housing Bubble 1:
The Portland subway property prices rose 1.1% for the month and 10.6% year over year:
Washington DC subway housing prices rose 0.8% month-over-month and 10.7% year-over-year after hitting Housing Bubble 1’s high late last year:
House prices on the Boston subway rose 0.8% for the month and 12.7% year-over-year:
House prices on the Tampa subway rose 1.1% month-over-month and 11.9% year-over-year:
Denver subway property prices rose 1.0% for the month and 10.0% year over year:
Property prices in the Phoenix Metro rose 1.5% month-over-month and 15.8% year-over-year. This made Phoenix the market with the hottest annual house price inflation among the Splendid Housing Bubbles here ahead of Seattle (14.3%) and San Diego (14.2%):
New York Subway:
House prices rose 0.9% for the month and 11.3% year over year. As I mentioned earlier today, there were big differences by price tier: low home prices rose 14.9%, but condominium prices stayed in the same narrow range for three years. The Case-Shiller Index for New York City includes New York City and numerous counties in the states of New York, New Jersey, and Connecticut. What a wondrous tip over the past six months:
Property prices on the Las Vegas subway rose 0.9% month-over-month and 8.5% year-over-year:
Property prices in the Dallas subway – Counties of Collin, Dallas, Delta, Denton, Ellis, Hunt, Johnson, Kaufman, Parker, Rockwall, Tarrant, and Wise – rose 0.8% for the month and 9.2% year over year % are up 110% since 2000, which means house price inflation has been 110% over the past 20 years. The remaining few cities on the 20-City Case Shiller Index had 20-year house price inflation below 100%, making Dallas the last entry on this list of the most glorious real estate bubbles:
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