US Home Prices Rise Above July 2006 Levels, Hit New Record High

Tyler Durden's picture

Almost exactly ten years after the last housing bubble burst, unleashing a dramatic crash in US real estate prices - something Ben Bernanke had said in 2005 would be unprecedented, and is thus not a risk factor - today Case Shiller reported that as of September, its Index covering all nine U.S. census divisions, surpassed the peak set in July 2006 as the housing boom topped out, and in doing so the average home price has now climbed back above the record reached more than a decade ago, bringing to a close the worst period for the housing market since the Great Depression.

The average home price for September was 0.1% above the July 2006 peak in nominal terms. The National index reported a 5.5% annual gain in September, up from 5.1% last month. The 10-City Composite posted a 4.3% annual increase, up from 4.2% the previous month. The 20-City Composite reported a year-over-year gain of 5.1%, unchanged from August.

The gains have been unequal: just 34 of the largest 100 metropolitan areas have seen starter home prices recover to their previous peak, while 56 areas have seen high-end homes reach or surpass previous highs, according to home-tracker Trulia, confirming that the upper end of the market has been instrumental for the "recovery."

“The new peak set by the S&P Case-Shiller CoreLogic National Index will be seen as marking a shift from the housing recovery to the hoped-for start of a new advance” said Case Shiller's David Blitzer said. “While seven of the 20 cities previously reached new post-recession peaks, those that experienced the biggest booms -- Miami, Tampa, Phoenix and Las Vegas -- remain well below their all-time highs. Other housing indicators are also giving positive signals: sales of existing and new homes are rising and housing starts at an annual rate of 1.3 million units are at a post-recession peak.

It is also worth noting, that when adjusted for inflation, the index remains about 16% below the 2006 high. 

The new record caps a four-year recovery from the trough of 2012, when prices sat 27% below the peak after a crash that caused more than nine million American families to lose their homes.

As a reminder, the data is as of September, when interest - and mortgage rates - were stuck near all time lows. A lot has happened since then, most notably the advent of Trumpflation and a surge in mortgage rates. As we reported over the weekend, the recent "Increase In Mortgage Rates Has Shocked Consumers", once again putting the US housing market in peril.

For now, however, looking at 2 month old data, "the sky is the limit" as the WSJ puts it: while housing has lagged behind some sectors of the economy in recent years, there are signs of gaining strength: Single-family housing starts rose 11% in October, according to the Commerce Department, and the number of starts remains well below the historical average, suggesting there is room for acceleration.

Likewise, the share of first-time buyers rose to 33% in October from 31% a year earlier, inching closer to the historical average of 40%. The lack of first-time buyers had been a drag on the market because, without a deep pool of ready buyers of starter homes, owners of those homes have a harder time trading up.

Robert Shiller, an economist at Yale University who co-developed the index, said the record provides a significant psychological boost for homeowners, some of whom are finally seeing their homes above water after four years of recovery.

 

“It creates an atmosphere that the sky is the limit,” he said. Some economists are surprised by the magnitude of the home price gains in recent years given the more moderate pace of wage growth.

Others, pointing the discrepancy between the 5% annual growth in home prices and the far more subdued wage growth in recent years, are less optimistic: “It’s not clear with the degree of [economic] growth that we’ve had that we should have expected prices to rise this much,” said Doug Duncan, chief economist at mortgage company Fannie Mae. “We have a caution light on.”

Of course, it is easy to explain the delta when considering the historic debt bubble of the past decade. One reason home prices have risen so quickly is a prolonged period of ultra-low interest rates. However, as the WSJ again warns, rates have jumped about half a percentage point since earlier this month, and while they remain near historic lows, a sustained rise could slow price gains particularly in expensive coastal markets.

Putting the move in context, last week housing expert Mark Hanson warned that for end-buyers who rely on mortgages to purchase a house, "Houses have never been more expensive to end-user, mortgage-needing shelter buyers. The recent rate surge crushed what little affordability remained in US housing. It now it requires 45% more income to buy the average-priced house than just four years ago, as incomes have not kept pace it goes without saying. The spike in rates has taken "UNAFFORDABILITY" to such extremes that prices, rates, and/or credit are now radically out of scope. "

* * *

But even before the recent spike in rates, not all was as rosy as the headline would make it seem: about 12% of homeowners who have a mortgage now owe more than their home is worth, down from more than 30% at the bottom of the market, according to Zillow. “Personally I wouldn’t be throwing confetti because my house is worth what I paid for it back eight years ago,” said Nela Richardson, chief economist at real-estate brokerage Redfin.

Still, in many parts of the country that were battered by the crash, a return to near-normal conditions has come as welcome relief, and faster than many expected. The median home value in Lehigh Acres, Fla., on the eastern edge of Fort Myers, bottomed at about $61,000 after peaking at $230,500 in July 2006, according to Zillow. Today, the median home price has risen to about $140,000, a level officials say is closer to what the area can sustain in an era of tight mortgage credit. In fact, Fort Myers now has a shortage of starter homes, said Mayor Randall Henderson.

In short: today's report was good news for housing; however the real test for the US housing market will be what happens as the recent "renormalization" in rates takes hold; absent a similar rebound in wages, the latest all time high in home prices will prove to be short lived. Finally, one can't ignore the political component: housing peaking just as Obama leaves. We have a feeling it will have a far more turbulent time under president Trump...

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Hitlery_4_Dictator's picture

Quite the roller coaster ride, hopefully this is not the final push for the apex before the plunge towards the valley.

nope-1004's picture

When the power brokers debauch the unit of exchange and price it at zero, assets bubble appear and prices naturally rise as a result.

PM's are the obvious exception because of the clear message it would send if the gold:house price ratio were at historic norms.

The FED continues its ruinous money laundering actions.  Humanity is paying the price by reduced living standards as a result of a massive housing and debt bubble.  When this thing blows, holy smokes.......

SomethingSomethingDarkSide's picture

Better toss over half my income into a McMansion slapped together with Chinese Drywall by Illegals!

What could go wrong?

HRH of Aquitaine's picture

Toxic mold because you didn't understand how to operate your whole house fan. On the inside of your walls.

Raffie's picture

Real Market is all fluff.

I am already putting my hands high in the air for when we crest the apex and start the wild ride down. What a ride it will be for sure.

Mtnrunnr's picture

Screw that. hopefully it is! I can't afford a cardboard box to take a dump in here in Denver. I'd love the chance to actually take a reasonable mortgage. Those people who stand to lose money have been fucking me sideways on rent for the last 15 years. Fuck them and their bullshit home equity that is predicated on someone's ability to gouge me.

Angry White Guy's picture

Plus one.  Life is supposed to be about building a life for one's self and maybe a family.  As a young professional, I'm lucky to just live.  Owning my own home, is a sad, cruel joke.

SERReal1's picture

I hear you brother. Same thing is going on here in Reno, NV. Average sized house (4/3/2 2200 sq ft) for a family of 5 in an area with decent (for NV) schools and no crack heads is well north of $400K. Rent is no better. Figure $2K plus per month for the size of house I just described.

If you use the multiple of 3 times income for house affordability, there are not a lot of jobs here in Reno that pay $135K plus to afford the housing. All those jobs that were supposed to pay so good at Tesla's Gigafactory don't pay what they were advertised when the state bent over and gave them every tax break known to man to build up here.

Even if all the jobs they talked about paying $50K or so a year had come to pass, with both family members working at that wage, that puts their affordability at about $300K. However, most of the jobs have been of the $12/hr variety, meaning that the increase in prices here are all bullshit.

rejected's picture

"Lease to own maybe?"

No,,, Just leasing / renting or whatever you might call it. 

That's what it really is. You owe the bank which just printed up the money to 'loan' you and you owe your friendly parasites comically called government. You have to have permission to do anything to the property, first by government, then by the Stasi home overlords called Home Owners Association.

Home Ownership.... American style..... ROFLMAO...

Bad Whitey's picture

Can't find anything in Commerce City?  That area still seems pretty reasonable if you don't mind commuting to Denver.  

buckstopshere's picture

Is it a good time to sell and take profits?

Mr. Schmilkies's picture

Chance the Gardener: Yes. In the garden, growth has it seasons. First comes spring and summer, but then we have fall and winter. And then we get spring and summer again.

 

G-ray's picture
Now get this, honky. You tell Rafael that I ain't taking no jive from no Western Union messenger. You tell that asshole if? he got something to tell me to get his ass down here himself.
Mtnrunnr's picture

That and mortgage rates just rose about 1%. Are you suffocating yet?

SHEEPFUKKER's picture

This is good news for the children right?

ChemtrailPilot's picture

You won't get a bargain like this again soon, goyim! Buy now! Cheap debt for all!

taketheredpill's picture

 

 

Home Prices recovered but Home Ownership didn't.

 

It peaked at 70% in mid-2000's and not sits at 64%, the lowest level going back to 1980's.

 

Great time to be a landlord.

JRobby's picture

All that "shadow inventory" sold off?

canisdirus's picture

Some went to the chinese speculators, but I can still find quite a few of these houses sitting, rotting, with boarded up windows, in my neighborhood where average house prices are north of 800k.

bornlastnight's picture

"US Home Prices Rise Above July 2006 Levels, Hit New Record High"

I don't know about that.  Checking Zillow for houses in my neighborhood, prices have dropped over the past year.  More bullshit numbers from the Obozo government liars.

But it's for Obama's legacy...

j0nx's picture

Certainly not in most places here in N Va. My old neighborhood of course is one of the few that has lost value but most everywhere else in this area is up 15% year over year. Even now in the out of season time prices are still as high or higher than they were in the summer and decent shit is still selling fast.

gatorengineer's picture

This is just made up crap.  I am sure in a few hot markets it may be the case but for me Im 35 percent down from 2007.

MaxMax's picture

Home prices might be back at 2006 levels, but incomes aren't.  The only way that works is with low interest rates. and even that has its limits.

south40_dreams's picture

The end is quite near

1stepcloser's picture

Everyday, we are one day closer to the end

1stepcloser's picture

I need to see the Greater fool supply chart ZH... 

corporatewhore's picture

I can't afford buying in suburbia and so currently rent.  In my area, I would describe the housing market as insane and clearly in bubble territory.  I can afford a home with a 40 minute drive but can't convince the wife to make the move despite being able to get square footage at roughly 60 compared to 200 dollars per sf.  

So should I dump the wife and move?  LOL./sarc

Bad Whitey's picture

What you do is tell her high maintenence, blood sucking, over-priviledged American ass that it's time to move whether she likes it or not because building equity is vital to any chance at a comfortable retirement for most people.  Keep letting her run the show and you'll keep paying for it.  

Rentenmark's picture

Home prices are very regional.  Here in the Chicago area, certain suburbs are definately above the previous peak levels; while others are still 20 to 30 percent below.  We have been stuck renting my wife's old condo for 5 years waiting for the price to return and its still well underwater.  If you ain't in the "good" neighborhood, you are out of luck.

It seems to me the increasing locations are full of white collar jobs, top schools, and good transportation.  Areas that were once blue collar have been decimated and are well below peak values.

innertrader's picture

THAT MAKES SENSE considering ALL of our blue collar jobs have been removed from the USA.  However, the while collar jobs have also been moving our of the USA!  One example:  a draftsman here in the USA now works for a company owned by an individual from India and that company has ALL of the work done in India and simply has a USA citizen draftsman SIGN OFF on it to make it "legal".  I had no idea that even this was being done; more and more I might add.  They have to in order to stay in business.

Hopefully TRUMP will change all this!

 

TRIUMPH with TRUMP! 

gatorengineer's picture

The house chart looks spot on.

Publicus's picture

Wait till after we deport 20 million illegals.

innertrader's picture

It will take awhile, one step at a time, but I'D LOVE TO SEE IT!!!!

rejected's picture

Going to be a long, long, loong, loonnnggg wait.

Lost in translation's picture

I wouldn't buy a house anywhere in CA ever again, no matter what the price may be.

Demographics resemble Third World

Diseases seen commonly in Third World

Corrupt police

Corrupt courts

Corrupt, Bolshevik politicians

Exploding crime/gangs/violence

Traffic gridlock

Urban blight spreading everywhere

No water

End.

 

 

zagzigga's picture

You forgot one thing - homes that are overpriced even after a crash.

 

innertrader's picture

Gee.... there wasn't any "Lost in translation" in that statement!  At least not to me. lol

wmbz's picture

Have to suck in as many lambs as possible before the slaughter! We have away to go yet, but the blood will flow.

innertrader's picture

ALL I KNOW is that the socialist in CA are moving out of CA and spreading their disease to places like Denver and Austin!  Their disease is making me sick!!!

buckstopshere's picture

They're moving up to Oregon in far larger numbers.

SERReal1's picture

Coming to Nevada as well. Mainly in Vegas and Reno. And to think, NV used to be a good place to live.

buckstopshere's picture

Will an interest rate hike and higher mortgage rates pop that housing bubble?