A month ago, when we reported on the signal America's "most important housing market" is sending we said the following:
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, the first (not to be confused with the current) housing bubble peaking around 2005, and then the European sovereign debt bubble.
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?
The answer is still unclear. But what the chart below shows is quite clear: the relentless appreciation in the San Francisco housing market is over, and after rising by 18.2% in April, in May the San Fran market posted a mere 15.4% Y/Y price increase: the lowest since 2012. And while the Fed's liquidity injections continue, if only for a few more months, and the second dot com bubble is clearing raging as the recent ridiculous Zillow-Trulia deal confirmed, it appears that the "?" bubble (as defined) is now well in its deflationary phase. Any attempts to restore the upmove will certainly require trillions more in fresh liquidity.