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Chart: Low, Mid & High Housing Bubble Indices

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  • Chart: Low, Mid & High Housing Bubble Indices

    This chart breaks down the Case-Shiller Housing data into 3 groups: Low Bubble (less than 6% annual housing price growth during 2000-2006 bubble period), Mid Bubble (6-10% annual growth during bubble period), and High Bubble (over 10% average annual growth during bubble).

    Lo Bubble: Denver, Atlanta, Detroit, Charlotte, Cleveland, Dallas
    Mid Bubble: Chicago, Boston, Minneapolis, Portland, Seattle
    High Bubble: Phoenix, Los Angeles, San Diego, San Francisco, DC, Miami, Tampa, Las Vegas, New York

    The data has also been seasonally adjusted based on historical annual cycles which bottom in February and peak in August. The most recent data available at this time is the May 2008 Case-Shiller report.

    One thing you may notice is that the Low Bubble index has been flat for 3 months. Detroit is pulling down on that index while the other cities are showing some strength. Mid Bubble has begun to reduce its rate of decline and High Bubble is still dropping like crazy.

    Another noteworthy observation is that the High Bubble cities all had flat or declining prices for a significant period in the '90s. That snowball got pushed up the hill and then was released, picked up momentum and grew faster than the others, creating the biggest bubble. Or...snowman.

    June data is due out next Tuesday. Look for many Low and Mid Bubble cities to post positive month-to-month gains. Keep in mind that the seasonal adjustment for May is -.04%, while June is -.36%. So any city or index posting greater than .32% month-to-month increase is showing a real positive trend.

    We are due for 3 months of cyclical increases and the MSM will play it up to be the end of the housing bubble based on the growing number of markets that will no longer be declining. Then we'll have the down trend through Feb '09. I'll keep updating the chart to try to sort out what is just seasonal fluctuations and what is a real change of trend.

    Jimmy

    Last edited by jimmygu3; 02-26-09, 01:19 AM.

  • #2
    Re: Chart: Low, Mid & High Housing Bubble Indices

    Originally posted by jimmygu3 View Post
    This chart breaks down the Case-Shiller Housing data into 3 groups: Low Bubble (less than 6% annual housing price growth during 2000-2006 bubble period), Mid Bubble (6-10% annual growth during bubble period), and High Bubble (over 10% average annual growth during bubble).

    Lo Bubble: Denver, Atlanta, Detroit, Charlotte, Cleveland, Dallas
    Mid Bubble: Chicago, Boston, Minneapolis, Portland, Seattle
    High Bubble: Phoenix, Los Angeles, San Diego, San Francisco, DC, Miami, Tampa, Las Vegas, New York

    The data has also been seasonally adjusted based on historical annual cycles which bottom in February and peak in August. The most recent data available at this time is the May 2008 Case-Shiller report.

    One thing you may notice is that the Low Bubble index has been flat for 3 months. Detroit is pulling down on that index while the other cities are showing some strength. Mid Bubble has begun to reduce its rate of decline and High Bubble is still dropping like crazy.

    Another noteworthy observation is that the High Bubble cities all had flat or declining prices for a significant period in the '90s. That snowball got pushed up the hill and then was released, picked up momentum and grew faster than the others, creating the biggest bubble. Or...snowman.

    June data is due out next Tuesday. Look for many Low and Mid Bubble cities to post positive month-to-month gains. Keep in mind that the seasonal adjustment for May is -.04%, while June is -.36%. So any city or index posting greater than .32% month-to-month increase is showing a real positive trend.

    We are due for 3 months of cyclical increases and the MSM will play it up to be the end of the housing bubble based on the growing number of markets that will no longer be declining. Then we'll have the down trend through Feb '09. I'll keep updating the chart to try to sort out what is just seasonal fluctuations and what is a real change of trend.

    Jimmy

    I expect some correlation with the waves of mortgage resets, as per the January 2007 Credit Suisse chart and others. As reset volumes temporarily decline inbetween waves, housing prices may appear to stabilize. Of course there is just the standard seasonal late-spring to late-summer uptick; more people buy houses when the sun is shining and the kids are out of school. EJ's warnings about rising unemployment point to another downleg coming... when I don't know. If that happens at the same time as a rise in defaults and foreclosures (offset some number of months from the actual reset peaks), the drops could be particularly severe.

    So far the overall decline here in Portland has been modest, roughly 5%. But there are individual stories that point to greater pain, such as a house that sold for $485,000 in 2005, sold at auction in 2007 for $400,000, listed this spring at $339,000 and just sold for $285,000. If the number of those kinds of sales overtakes the still profitable ones, look out below.

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    • #3
      Re: Chart: Low, Mid & High Housing Bubble Indices

      Update based on today's Case-Shiller numbers:

      Note that all my indexes are seasonally adjusted.

      Low Bubble Index: Up .33% month-to-month. Flat since February. All cities in the index are up nominally, even Detroit. Expect the nominal seasonal top to come in August, then dropping 1.6% to seasonal low in Feb '09. Less of a drop could indicate a positive trend.

      Mid Bubble Index: Even for the month. Flattened out after sharp drop in Q1 '08. All cities up nominally for the month except for Portland. Expect the nominal seasonal top to come in August, then dropping 1.6% to seasonal low in Feb '09.

      High Bubble Index: Down 1.7% month-to-month. Terrible, but better than the last few months. Down 22.5% for the last 12 months. All cities down nominally in June except New York. No bottom in sight for these markets. Best case IMO is a 10% nominal drop from here bottoming in Feb-March '09. But I'm not holding my breath....

      Jimmy

      Comment


      • #4
        Re: Chart: Low, Mid & High Housing Bubble Indices

        Update based on today's (9/30/08) Case-Shiller numbers:

        First of all, we all know the current crisis will have a negative effect on housing. However, I am continuing my analysis of the Case-Shiller data and my 3 seasonally adjusted indexes (Low, Mid & High Bubble). As you can see, the low bubble cities have been affected the least, and the high bubble the most. A systemic meltdown could sink all ships.

        Low Bubble Index: Flat month-to-month. Flat since February. Down 6.7% YOY.

        Mid Bubble Index: Down .4% for the month, -8.5% YOY.

        High Bubble Index: Continued trajectory of -1.7% month-to-month. Down 23% YOY. All cities down nominally in July. If you've always wanted to live in California or Florida and you have cash, this winter could present some great opportunities.

        Jimmy[/quote]

        Comment


        • #5
          Re: Chart: Low, Mid & High Housing Bubble Indices

          This is a very useful chart jimmygu3. Thank you very much for creating and updating. I missed it the first time around.

          Comment


          • #6
            Re: Chart: Low, Mid & High Housing Bubble Indices

            Originally posted by babbittd View Post
            This is a very useful chart jimmygu3. Thank you very much for creating and updating. I missed it the first time around.
            Thanks, glad you find it helpful. Here's the updated chart.

            Comment


            • #7
              Re: Chart: Low, Mid & High Housing Bubble Indices

              So the headlines today are saying that home prices fell at a record pace last month. Not the way I see it. The problem with their methodology is that they are only looking at YOY % change. The steepest declines happened in Q4 '07 and Q1 '08, so those are still built into the 12-month window they are looking at. In fact, the rate of decline has moderated for the past 6 months. If we see a continuation of the current trends, the press will be calling it a "recovery" in 6 months, when the declines of '07 are outside of the trailing 12 months. That is a BIG 'IF', though, given the market crash we're in now.

              I think this ALL hinges on what the government casino does to get credit moving, prevent foreclosures and stabilize home prices. If they don't pull a rabbit out of their hat, and mortgages become scarcer and scarcer, housing could really be screwed.

              Here's this month's breakdown, with the Case-Shiller August data released 10-28-08:

              Low Bubble Index: -7.9% off Aug '06 peak. -0.3% month-to-month. -6.9% YOY. Detroit (-27.2% off Dec '05 peak) is the dog that drags this index down. If you forget the motor city, this index dropped 5% from its peak in the second half of '07 and has stayed flat YTD.

              Mid Bubble Index: -9.1% off Jul '07 peak. -0.7% for the month, -8.9% YOY.

              High Bubble Index: -29.5% off May '06 peak. Continued trajectory of -1.7% month-to-month, -23.4% YOY. All cities down nominally in August. It's gonna get uglier in the next few months. Buying opportunities for those with cash?

              Jimmy

              Comment


              • #8
                Re: Chart: Low, Mid & High Housing Bubble Indices

                Originally posted by jimmygu3 View Post
                Buying opportunities for those with cash?

                Jimmy

                YES! Buy a house if not now in the next 12-14 months, CS index was showing a bottom in mid 2010, I think at this rate, the bottom will be here by late 09 early 10. Told my mom to go buy a house, she just did. (she had been renting after selling in july 05, after my pleading with her.)


                I'm taking a remote to iraq for 1 year next year SO THAT I can tap my IRA/401K without getting killed in taxes. (it also allows me to keep flying, allows me buy a house in our (the wife and I) home town, and sets me up so that I can get out of the military w/o getting extended again, and again....

                At least the pound of flesh I pay will get us off the merry-go-round of military life.

                Plus when I'm a civilian I can do the same job in Iraq (teaching Iraqis how to fly airplanes for 4 times what I make now. (or work for 3 months a year and make THE SAME as I do now, which is what I intend on doing).

                Gotta love mercenary work, it sure does pay well (guess that's the price of getting shot at, Right?).

                I think EJ's advice has been pretty damn stellar, for all you complainers out there. Put my stocks into 3 mo UST BEFORE THE CRASH (trust me, it was painful getting only 3% while every thing was rocking, but I'm feeling MUCH BETTER NOW!), inching SLOWLY into stocks as of 2 days ago but only about 18% of my UST hoard, bought all the silver and gold I could afford with cash BEFORE you could not get any anymore, Hell, I'm even planning my CAREER based on insights he has provided.

                So, Big thanks EJ. It's been more than worth the $95. (and far better than the dines letter which I also have, still holding my -80.0% down uranium stocks thought because I would not get very much by selling them now and who knows, maybe they will go up SOMEDAY;) )
                Last edited by jtabeb; 10-28-08, 10:28 PM.

                Comment


                • #9
                  Re: Chart: Low, Mid & High Housing Bubble Indices

                  The latest update of my ongoing analysis of the Case-Shiller data, now with the November numbers included and a 3.64% trendline (the pre-2000 average annual appreciation). Looks like the events of October hammered every city in the US by about 2%. Lo Bubble was down 1.6% while Hi & Mid were down 2.2%. Lo has crossed below the trendline, Hi is making a beeline for it (April, perhaps?), and Mid may manage to make a softer return to the mean over the next few years.



                  Another observation: Hi Bubble experienced a bubble and crash in the early '90s. It was 15.4% above the trendline in Feb '90, crossed the trendline roughly 3 years later in Nov '92, and slowly bottomed at -10.9% in May '97. In our current situation, Hi Bubble peaked at 90.6% above the trendline in March '06, and will likely cross the trendline roughly 3 years later, just like last time. If it takes an additional 4.5 years for a "real" bottom, and its magnitude is proportional to the previous top/bottom ratio, that would put us in 2013 with nominal prices at 1987 levels! Hard to imagine that but then again, this whole crash was hard for people to imagine a couple years ago.

                  Jimmy

                  Comment


                  • #10
                    Re: Chart: Low, Mid & High Housing Bubble Indices

                    Jimmy, I love this f'n chart!!! How far back in time before the year 2000 does the 3.64% trendline go for?

                    Comment


                    • #11
                      Re: Chart: Low, Mid & High Housing Bubble Indices

                      Originally posted by jimmygu3 View Post
                      The latest update of my ongoing analysis of the Case-Shiller data, now with the November numbers included and a 3.64% trendline (the pre-2000 average annual appreciation). Looks like the events of October hammered every city in the US by about 2%. Lo Bubble was down 1.6% while Hi & Mid were down 2.2%. Lo has crossed below the trendline, Hi is making a beeline for it (April, perhaps?), and Mid may manage to make a softer return to the mean over the next few years.



                      Another observation: Hi Bubble experienced a bubble and crash in the early '90s. It was 15.4% above the trendline in Feb '90, crossed the trendline roughly 3 years later in Nov '92, and slowly bottomed at -10.9% in May '97. In our current situation, Hi Bubble peaked at 90.6% above the trendline in March '06, and will likely cross the trendline roughly 3 years later, just like last time. If it takes an additional 4.5 years for a "real" bottom, and its magnitude is proportional to the previous top/bottom ratio, that would put us in 2013 with nominal prices at 1987 levels! Hard to imagine that but then again, this whole crash was hard for people to imagine a couple years ago.

                      Jimmy
                      Thank you.

                      Comment


                      • #12
                        Re: Chart: Low, Mid & High Housing Bubble Indices

                        Originally posted by babbittd View Post
                        Jimmy, I love this f'n chart!!! How far back in time before the year 2000 does the 3.64% trendline go for?
                        Glad you like it. It really helps me to cut through the clutter as to what markets are falling because they went up too high and which are falling for other macroeconomic reasons like the credit crunch.

                        As far as the trendline goes, it really depends on where you start and end, as my data goes back to 1930, which was the top of a bubble. If you go from 1930 to today, the average is 3.0%. If you go from 'top to top', 1930-2006, the average is 3.5%. From 1950 to 2000 the average is 4.5%. 1980 to 2000 is 2.8%. You get the picture. 3.6% is a pretty good average.
                        Last edited by jimmygu3; 02-10-09, 05:39 PM.

                        Comment


                        • #13
                          Re: Chart: Low, Mid & High Housing Bubble Indices

                          In this installment, with the Dec '08 data now in, I zoom in on the 2000-2008 range. Lo Bubble is down 1.8%, Mid and Hi are both down 2.6%. Every city is falling sharply. The worst of the Hi Bubble cities , SF, Vegas and Phoenix, have crossed the trendline, down 4-5% in Dec and ~33% YOY. All but one of the other Hi Bubble cities peaked higher and will likely all hit the trendline this year. The interesting one is NYC; it peaked the lowest and is now the highest of the Hi Bubble cities. It is behaving more like the Mid Bubble index.

                          Jimmy

                          Comment


                          • #14
                            Re: Chart: Low, Mid & High Housing Bubble Indices

                            Originally posted by jimmygu3 View Post
                            In this installment, with the Dec '08 data now in, I zoom in on the 2000-2008 range. Lo Bubble is down 1.8%, Mid and Hi are both down 2.6%. Every city is falling sharply. The worst of the Hi Bubble cities , SF, Vegas and Phoenix, have crossed the trendline, down 4-5% in Dec and ~33% YOY. All but one of the other Hi Bubble cities peaked higher and will likely all hit the trendline this year. The interesting one is NYC; it peaked the lowest and is now the highest of the Hi Bubble cities. It is behaving more like the Mid Bubble index.

                            Jimmy

                            It looks like the rate of decline is moderating, but the depth of decline still has a ways to go, at least for the top two tiers. In a year or two we probably will enter the slow grinding phase where no one in the MSM wants to talk about real estate anymore. Looking at these charts, I would find it hard to believe that the Fed could reverse this process without destroying the dollar.
                            Cheers, jimmy, awesome.

                            Comment


                            • #15
                              Re: Chart: Low, Mid & High Housing Bubble Indices

                              Originally posted by Jay View Post
                              It looks like the rate of decline is moderating, but the depth of decline still has a ways to go, at least for the top two tiers. In a year or two we probably will enter the slow grinding phase where no one in the MSM wants to talk about real estate anymore. Looking at these charts, I would find it hard to believe that the Fed could reverse this process without destroying the dollar.
                              Cheers, jimmy, awesome.
                              Thanks, Jay. Yeah, I think you're right and that "slow grinding phase" could last several years. I wouldn't say the rate is moderating, though. All the indices fell in 2007, then moderated in early to mid 2008 (Hi Bubble only slightly). For the last 4 months of '08 we are back to the steep trajectories of '07. From bunny slopes back to Black Diamonds!

                              Jimmy

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