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America's Most Important Housing Market Signals A Red Alert For Housing Bubble Watchers

Tyler Durden's picture




 

When it comes to critical housing markets in the US, none is more important than San Francisco.

Courtesy of its location, not only does it reflect the general Fed-driven liquidity bubble which is the tide rising all housing boats across the US, but due to its proximity to both Silicon Valley and China, it also benefits from two other liquidity bubbles: that of tech, and of course, the Chinese $25 trillion financial debt monster, where since the local housing bubble has burst, local oligarchs have no choice but to dump their cash abroad.

It is no surprise that during ever single previous bubble peak, San Francisco home prices managed to post a 20% annual increase, starting with the dot com bubble in the year 2000, and certainly the first (not to be confused with the current) housing bubble peaking around 2005.

Which is why, while today's Case Shiller data was widely disappointing across the board, indicating a significant slowdown in price gains (and on a sequential seasonally adjusted basis, practically a decline), the one market we paid particular attention to was San Francisco. What we found is a red flag for everyone waiting to time the bursting of the latest housing bubble. Because after an unlucky 13 months of posting consecutive 20% Y/Y price gains, the San Francisco bubble appears to have finally burst, posting "just" an 18.2% price increase, the lowest since January of 2013.

So, has the global coordinated credit bubble burst? Judging by stocks, which just traded at their all time highs, ironically based on housing data from the West (as we just reported) not yet. As for the wealthiest buyers of homes, usually the best leading indicator of easy financial conditions: they appear to be quietly putting up for sales signs in front of their bay area mansions.

 

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Tue, 06/24/2014 - 10:48 | 4889251 tarsubil
tarsubil's picture

Look at that stick save by the Fed in 2011. Screw you Fed.

Tue, 06/24/2014 - 10:49 | 4889260 PartysOver
PartysOver's picture

The Fed Ponzi will continue until it doesn't.   Just Buy!

Tue, 06/24/2014 - 11:07 | 4889339 Newsboy
Newsboy's picture

Sell thos walk-ups in the "Tenderloin" NOW!

Tue, 06/24/2014 - 11:08 | 4889347 ParkAveFlasher
ParkAveFlasher's picture

If you like food trucks, you'll love apartment trucks!

Tue, 06/24/2014 - 11:25 | 4889419 NotApplicable
NotApplicable's picture

Just think, sans bubbles, that line has historically been flat at around 2%.

So much for the value of financial planning. At this point, the only choice left is "Red or Black?"

Tue, 06/24/2014 - 11:30 | 4889449 ParkAveFlasher
ParkAveFlasher's picture

"Historically flat" is a fictional construct meant to look like math.  Many "averages" are.  The world is not flat. 

Tue, 06/24/2014 - 11:59 | 4889570 hidingfromhelis
hidingfromhelis's picture

The average human has one testicle and one breast.  

Tue, 06/24/2014 - 12:17 | 4889650 jbvtme
jbvtme's picture

and no brain

Tue, 06/24/2014 - 12:42 | 4889728 CCanuck
CCanuck's picture

Hiding... am I above average if I have 3 testicles?

Just ask'n...cause mom always said it made me exceptional.

Tue, 06/24/2014 - 12:06 | 4889609 zaphod42
zaphod42's picture

If you like food trucks, you'll love apartment sedans.

 

Fixed it for ya'  You're welcome.

 

Craig

Tue, 06/24/2014 - 11:08 | 4889343 gh0atrider
gh0atrider's picture

Fuck housing and fuck real estate! 

gh0atrider is a fool who builds his castle upon a hill of bits!

Tue, 06/24/2014 - 10:54 | 4889274 Shizzmoney
Shizzmoney's picture

The DOW and S&P have another year to go to go as high as the Moon.  The Wall St pundits on Wall St are banging the drums that everything is now "recovering" and fixed thanks to their "data" (which is the new "journalistic objectivity".  "Of course you are wrong; LOOK AT THE DATA!!!!!11111").

2015, around August, is when the fun begins.  The Fed might have a few more moves ala Japan to extend and pretend, but the dam of debt WILL break...if karma is the judge.

Tue, 06/24/2014 - 11:00 | 4889303 LawsofPhysics
LawsofPhysics's picture

Why August 2015?  There is no "market", ergo the numbers can be whatever they want them to be.  Didn't you say the same thing about August 2014?  What dam is going to break?  Please elaborate, because all I see is a slow steady grind that eventually accelerates into a global society much like the one found in India or Afghanistan.  Get your tribe in order now, beat the rush.

Tue, 06/24/2014 - 11:13 | 4889366 BandGap
BandGap's picture

I think he is looking at the lag time between the shit rolling over and the shit hitting the fan. But since nothing seen before should be used to figure out what is going to happen, exactly, it's anyone's guess. Personally the frequency looks to be tightening and the slope more severe for the upcoming crash based on this data. Could happen any day.

Every day this stays afloat is another day to gather strength and circle the wagons. You can never be prepared enough for the unknown.

Tue, 06/24/2014 - 12:32 | 4889697 centerline
centerline's picture

I wager it is a Martin Armstrong date.  2015.75 +/-.

Tue, 06/24/2014 - 11:10 | 4889352 ENTP
ENTP's picture

Not exactly, they have a year before budget headwinds appear again, so TPTB have a year to unload/hedge/unwind the massive long unto the muppets.  I speculate that is exactly what we are seeing now.  Why not convince the masses to purchase at ATH, why you unload?

Tue, 06/24/2014 - 12:04 | 4889602 zaphod42
zaphod42's picture

The market dam won't break until 2016; the 'Ins" will juice that sucker like crazy running up to the election.  Unless Golden Sacks falls sooner, look for October, 2016.  

My prediction - not my bet though.  I'm holdin' cash, suckers.

Craig

Tue, 06/24/2014 - 10:54 | 4889277 Winston Churchill
Winston Churchill's picture

Every other house on Jupiter Island is for sale.

The most expensive real estate in the US.

Never ever seen anything like it in twenty years.

Tue, 06/24/2014 - 11:03 | 4889321 JRobby
JRobby's picture

Interesting observation. I ride my bicycle up and down "the island" but I believe that there is a restriction on realtor signage there (among other things).

Assume the exodus to Paraguay is underway? JI is a stronhold of old money families. 

Tue, 06/24/2014 - 11:21 | 4889405 NotApplicable
NotApplicable's picture

Will they take Tiger Woods with them? Or leave him behind to watch over the place?

Tue, 06/24/2014 - 12:05 | 4889605 JRobby
JRobby's picture

Somebody has to tend to the bags. 

I better ride out there more often. Could be massive hooker parties out there before long....................

Tue, 06/24/2014 - 12:07 | 4889612 dontgoforit
dontgoforit's picture

I'd guess his jet will take him where ever he wants to go.   And I believe he's playing in a tounament coming up soon.

Tue, 06/24/2014 - 12:09 | 4889620 Winston Churchill
Winston Churchill's picture

No signs allowed for realtors.

Go into the reator corner of Bridge and Beach to get a feel.

Tue, 06/24/2014 - 13:21 | 4889658 JRobby
JRobby's picture

I doubt I would be admitted under current wardrobe restraints.

Tue, 06/24/2014 - 10:55 | 4889280 Skateboarder
Skateboarder's picture

lol these fools are still going to be making 100K in ten years, and still going to expect to compete in a 2M market with those wages.

Tue, 06/24/2014 - 10:58 | 4889289 El Oregonian
El Oregonian's picture

San Francisco, the fruits and nuts capital of Cali. Land of the hot-buttered buns.

Things are about to get real sticky!

Tue, 06/24/2014 - 10:57 | 4889291 Bill of Rights
Bill of Rights's picture

The new home sales number reported today by the Government’s Census Bureau with “seasonal adjustments” is simply not believable.  If you look at this link and scroll down to the “Not adjusted” section, you’ll see TOTAL of 9,000 more homes nationwide were sold in May vs. April:

 http://www.census.gov/construction/nrs/pdf/newressales.pdf

 

Furthermore, you’ll see the average sales price soared nearly 5%.  This is not  consistent at all with past data correlations when rising prices curtail sales.

Finally, we know that 93% of all new home buyers use a mortgage to buy a new home.   New home sales are based on contract signings,  When a contract is signed, the buyer then applies for a purchase mortgage.  Purchase mortgage applications plunged in May.

 

http://investmentresearchdynamics.com/todays-new-home-sales-report-not-believable/

Tue, 06/24/2014 - 10:59 | 4889305 JRobby
JRobby's picture

They will need the return of low/no doc and pay option ARM's to inflate this rotting corpse. It won't do any good long term but they will get desperate enough.

Tue, 06/24/2014 - 11:19 | 4889395 NotApplicable
NotApplicable's picture

From what I'm seeing, marginal borrowers are being shut out of the market due to lenders fearing running afoul of the "Money Laundering Act." Paper trails are being demanded for everything. Pay your bills in cash? Sorry, but you must be a terrorist.

IMO, this is the only thing to come out of the MBS lawsuits. Wall St. perpetrates massive fraud, then blames it all on the little guys down on Main St.

Tue, 06/24/2014 - 12:14 | 4889639 JRobby
JRobby's picture

Bingo, a couple of the gluttonous brokers do some time. Some get a clawback/buy back. The big players walk.

This fraud went on for several years wide open. The small guys (dopes/stooges/bagmen) thought it could go on forever, making $20k fees on a $400k loan etc. That was just the semi-legit stuff. There was huge kickback and outright fraud.

All the Wall Street wash outs went into mortgages then when that collapsed they went into "Merchant Funding" since small business can no longer get a LOC in the USA since the backstop (home equity) got anihilated.

 

Tue, 06/24/2014 - 11:04 | 4889326 RagnarDanneskjold
RagnarDanneskjold's picture

China slowdown.

Tue, 06/24/2014 - 11:06 | 4889337 youngman
youngman's picture

More IPOs will get er done...all that free money chasing a house....all those new billionaires need a mansion to be in the in crowd...its who you live next to that counts..so California

Tue, 06/24/2014 - 11:08 | 4889348 alien-IQ
alien-IQ's picture

It seems like every time ZH posts some grim headline, the market rockets to a new all time high.

Tue, 06/24/2014 - 11:36 | 4889469 ParkAveFlasher
ParkAveFlasher's picture

You are positioning two highly probable events next to one another, but that shouldn't produce a causal link.  It's like saying, "it seems like every time Dunkin Donuts puts a fresh rack of donuts on the shelf, the market rockets to a new all time high", or, "it seems like every time someone honks their horn in Midtown, the market rockets to a new all time high".

Just btfath

Tue, 06/24/2014 - 11:11 | 4889349 deflator
deflator's picture

 Wonder how much sanctions and the threat of further sanctions has oligarchs getting ahead of the curve. Isn't the main reason they bought high end RE in the U.S. the perception that their wealth would be insulated from confiscation?

Tue, 06/24/2014 - 11:11 | 4889360 Moneyswirth
Moneyswirth's picture

Unpossible.  CNBC is breathlessly telling me that consumer confidence is super high, housing data is rock solid, all is well again and we should see DOW 17,000 relatively soon.  Whats wrong with you people??

Tue, 06/24/2014 - 12:54 | 4889767 Bemused Observer
Bemused Observer's picture

"'Comrades!' cried an eager youthful voice. 'Attention, comrades! We have glorious news for you. We have won the battle for production! Returns now completed of the output of all classes of consumption goods show that the standard of living has risen by no less than 20 per cent over the past year. All over Oceania this morning there were irrepressible spontaneous demonstrations when workers marched out of factories and offices and paraded through the streets with banners voicing their gratitude to Big Brother for the new, happy life which his wise leadership has bestowed upon us. Here are some of the completed figures..."

There are those who see the truth, and then there is everyone else. Orwell was a prophet, a Jeremiah for our modern age.

Tue, 06/24/2014 - 11:21 | 4889404 Dick Gazinia
Dick Gazinia's picture

All hands.  Prepare to dive.  Aahh Oooga

Tue, 06/24/2014 - 11:39 | 4889496 tahoebumsmith
tahoebumsmith's picture

When the "Big One" hits SF all those investments will turn to rubble and total chaos will ensue.. All bets off because SF is long overdue..

Tue, 06/24/2014 - 12:12 | 4889635 dontgoforit
dontgoforit's picture

D.C. will come to their rescue - CA is their base.

Tue, 06/24/2014 - 11:46 | 4889516 sidiji
sidiji's picture

hmm hate to say this but your 'analysis' is rather stupid.

Tue, 06/24/2014 - 12:04 | 4889596 sbenard
sbenard's picture

Who needs houses? Who even needs an economy? Who needs jobs? We have PRINTED prosperity now!

Tue, 06/24/2014 - 12:04 | 4889601 sandhillexit
sandhillexit's picture

The San Fran bubble turns on so much protected land, commute times, and FB-GOOG-APPL money.  It's impossible at current salaries for regular folks (doctors, say) to swing $8k/mo in housing costs.  Salaries either start moving up or the stalled immigration bill brings in another round of indentured engineers.  Hence the "Made for TV" crisis on the southern border - it's really about the H1Bs.  

Tue, 06/24/2014 - 12:17 | 4889652 JRobby
JRobby's picture

Been like that there for over 30 years.

Tue, 06/24/2014 - 13:52 | 4889954 Pal
Pal's picture

You are probably correct, I spent 3.5 of my last 5 years as computer whore in Silly Valley and SanFran.  I had to commute an hour+ each direction because I just refused to pay $3.5K a month for a one bedroom apartment anywhere in SanFran.  Any apartment that shows up on Craigslist below $2K a month is rented within a couple hours.  If you work for a living it's almost impossible to find a place to live in SF... well unless you want to ride the bus for an hour each direction to a place on the ocean side.  I consider SF a great city to visit.. but I don't think is a very nice place to live IMHO.  As for the slavery of the local engineers, most are asian [and/or HB1s formerly or current from Philipines, China and especially India], it's their town, they won't ever leave, it's their tribe in control and the employers know that.  They use the HB1s to keep the wages down; that and racketeering to keep the wages low ala by have secret agreements between FB, Goog, Etc. companies not to poach employees.  The only way I stayed so long was that I moved out there to make higher pay to build my chipstack to leave the USA for SA and I lived like the local migrant workforce... cheap as could get.   You really need to smoke weed to stay sane in Kalifornia and I could not do that since I have to pass drug test for employment at times.  I will never move back, never.  Well pretty much have the same feeling for moving back to the USA..not.

Tue, 06/24/2014 - 15:56 | 4890500 jomama
jomama's picture

nobody here calls the city 'SanFran'.

Tue, 06/24/2014 - 12:05 | 4889604 wagthetails
wagthetails's picture

Thsi chart isn't that bad in reality.  the average increase is probably 2-3% over the year.  if it goes up 20%, get ready for contraction or many years of 0 growth.......well, until we hit hyperinflation.  wweeeeeeeeeeeeeeeeeeeeeeeeee.

Tue, 06/24/2014 - 13:46 | 4889938 headhunt
headhunt's picture

That last bubble on the chart will be named 'Blame Bush' bubble.

Tue, 06/24/2014 - 15:50 | 4890480 auntiesocial
auntiesocial's picture

I don't know if I can cut and paste National Mortgage News, but they are touting housing starts are up! and you thought those rose colored glasses were toys...

Tue, 06/24/2014 - 15:55 | 4890495 jomama
Tue, 06/24/2014 - 16:23 | 4890612 zipit
zipit's picture

Luv da YoY ROC indicators.  Da best.

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