Mark Hanson Reveals "The Next Housing Bubble"

Tyler Durden's picture

The striking Case-Shiller regional charts shown below, courtesy of MHanson.com, make Mark Hanson angry: "so, 2006/2007 was the largest house price bubble ever, but there is nothing to see here in 2017?" and sarcastically points out that "if this isn't a house price bubble, I would hate to see one."

His bottom line:

If 2006/07 was the peak of the largest housing bubble in history with affordability never better vis a’ vis exotic loans; easy availability of credit; unemployment in the 4%’s; the total workforce at record highs; and growing wages, then what do you call “now” with house prices at or above 2006 levels; worse affordability; tighter credit; higher unemployment; a weakening total workforce; and shrinking wages? Whatever you call it, it’s a greater thing than the Bubble 1.0 peak.

And visually:

Below are some further observations and "red-flags" from Hanson on Peak Housing, after the latest new home sales data:

  • Sharp downward sales revisions for past 3-months.
  • Huge downward price revisions for past 3-months, lower by 10%, 5% and 3%, respectively, exactly as I predicted on last month's release.
  • Builders maxed out on pricing power; Med & avg prices flat for 2-years.
  • The all-important Southern Region was flat YY; the South makes up over half of all sales in the nation, and drives builder demand and profits.
  • 100% of the June YY sales gain came from the Western Region, which doesn't jibe with the weak price performance and will likely be revised lower next month.
  • Income required to buy the avg priced builder house is at historical highs and has completely diverged from the multi-decade trend line.
  • Historically low growth & rebound relative to resales suggest "lack of supply" meme in the Existing Sales market is over-stated.

As he says, "Peak builder is here."

Finally some other quantitative and qualitative observations from the housing guru:

1) New Home Sales "up to" 1995 levels after $15 TRILLION in debt and Fed liquidity aimed largely at the sector.

2) Builder pricing power largely flat for 2-years.

3) Income required to buy the average priced builder house has completely diverged from the multi-decade trend line. This obviously explains why sales are only at 600k SAAR now vs 1.2 million in Bubble 1.0. Reversion to this mean will occur...either thru a sharp rise in income; new exotic loan programs, which make payment less; or house prices dropping.

4) Last time builders were this euphoric was the peak of the biggest credit bubble in history.

5) It's too bad the public isn't as euphoric about buying as the builders think they are.

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Shitonya Serfs's picture

Ching-chongs weren't buying here in '06-07...everyone was using free money to trade houses amongst themselves.

JRobby's picture

But, but, the PBOC has been restricting capital flight? (Laugh Track Deafening !!!)

petar's picture

Its funny how conservatives who pretend to be capitalists are Not huge fans of an economic bubble (the mother of capitalism)... this is when new business opportunities open..

Life of Illusion's picture

What stops FED from buying and buying and buying, 30yr-40yr-50yr..make it 100yr MBS?

 

stop? not

https://www.newyorkfed.org/markets/ambs/index.html

armada's picture

The FED is America's #1 WOE. It won't be fixed because politicians benefit from it. http://bit.ly/2eeHcZb

DJ Happy Ending's picture

except for dallas & denver i'm not seeing it in your charts mark.

considering inflation and the historical trajectory of housing prices, we haven't risen above the 2007 highs.

how long have we been hearing this same, tired trope here on the hedge?

thank goodness i'm only here for the bantz and not investment advice.

jeff montanye's picture

cpi since 2007 abour 18%.  not quite what houses have done since '07, but not too far off.  and what about builder sentiment and income required?

mickrussom's picture

Id say around the bay area the housing is a heck of a lot more ip than 18% from 2007 highs. Its out of control. I even make 220k base with 100k stock and wife makes 110k and I cant snag a house without being house poor. Sucks. And if its bad for me who the hell needs this?

Kayman's picture

Too much lost in aggregated charts.

SilverRhino's picture

Actually the Dallas bubble is NOT a bubble.   Population growth around here has literally gone through the fucking ROOF as everyone is bailing out of California, the NorthEast and Chicago land.   In the last couple of years I'd say we've picked up close to a million in DFW.   That's a structural demand spike and it's not going anywhere anytime soon as companies keep moving in here.  

 

It has basically killed Dallas as a Texan city and this place is basically the NYC of the South at this point.   

 

Hokkaido Bear's picture

Dallas has been thoroughly Californicated.

runningman18's picture

Bubbles have nothing to do with free markets and everything to do with government and central bank intervention; a typical product of socialism, not "capitalism". 

Undecided's picture

Actually its greed that is the problem and it runs on all fronts Capitalism as well.

Paul Kersey's picture

"3) Income required to buy the average priced builder house has completely diverged from the multi-decade trend line. This obviously explains why sales are only at 600k SAAR now vs 1.2 million in Bubble 1.0"

That's just "obviously" incorrect. Mark still hasn't learned that markets prices are not only regional, but in many cases they vary greatly from neighborhood by neighborhood. New house prices are up where I live in North Carolina, because land prices have gone way up, and labor and material costs are up almost 14% in the last three years. Still, builders are quickly selling almost everything they can build. Even with inventory way down, house sales still eclipsed 2006 sales and just hit an all time high.

It's amazing that Hanson ignores two of the main drivers of house prices: "location, location, location" and supply and demand economics. Inventories of existing houses here are so thin, that homes go pending within days after hitting the market.

What's scary here in this coastal town are all the apartments being built. These so-called "luxury" apartments could end up becoming tomorrow's ghettos. There is no planning, and this southern NC coastal town has traffic that is reminiscent of New Jersey traffic. The killer of this local housing boom will be the lack of infrastructure and the destruction of the city's quality of life. When main roads become parking lots, it's time to park one's life in some other less densely populated area.

CJgipper's picture

The high density condos and apartments are what scare me as well.  700k for a 1br apartment here in my southern town.  INSANE!!!!!!  15 miles away (all interstate), my 3800 sqft house on 3 acres is 425k.

devnickle's picture

Selling my house in Oregon. Went pending in 24 hours. Didn't even make it to the RMLS before I had appointments to show it. 8K. over my asking price. Probably could have held out for more, but I want out before this shitstorm crashes. Hopefully I make it through escrow and don't have to start over. The cliff approaches I fear. Not being a debt slave will be refreshing. At least until things bottom out again. IF, there's an economy left at that point?

runningman18's picture

Without government and central bank intervention, greed does not create the bubbles we have witnessed.  Government and central banks facilitate the environment in which greed can be taken to extremes.  Saying it's all about "greed" is just a lazy way to sidestep the real issue that leftists in particular don't want to confront - namely the fact that socialism causes economic failure every single time, and socialism is essentially what we have in America right now.  

VegasBob's picture

THERE'S NOTHING CAPITALISTIC ABOUT FEDERAL RESERVE MONEY PRINTING!

robobbob's picture

government sanctioned Fed cartel interest rates and money printing, with a nice dose of Fannie on top along with government back stopping failed CDO's...but only for their special friends.
real "open market" capitalism they got going there.

NOT!

in a real capitalism, Lehman wouldn't have been the only boarded up office tower. without government intervention, new business opportunities WOULD have become available to the street, instead of good money being used to prop up corrupt and bloated insiders.

Creative_Destruct's picture

 "an economic bubble (the mother of capitalism)..."

No, wrong. Boom and bust bubbles are  a feature of a mixed economy (capitalism + socialism) not properly restrained by hard money standards and restraint of elitist cronies.

Capitalism has to have these spirits dampened by real restraining natural feedback loops, one of those being a hard currency standard that restricts politically motivated excessive money creation. 

What we've had over the last decades IS NOT capitlaism...its been socialism for the rich cronie elitists, with the masses mollified with easy fiat phoney money...a combo of ingedients that's a recipe for short term euphoria, long term catastrophy, and extreme income and wealth inequality.

Hokkaido Bear's picture

These economic bubbles are not generated by capitalism...except the crony variety. Each has its origin in government intervention in the marketplace, not free market capitalism.

I am more equal than others's picture

 

 

petar the retard.  Bubbles are a function of greed not capitalism.  Capitalism is about letting the market decide how capital is allocated.  How lemmings act - you in particular - is a different story.  You see your neighbor or friend flip a house and then you want to do it too.  There is no practical method to constrain greed, common sense would work if it were common but it is rare. 

Stuck on Zero's picture

Nearly twenty flippers are happily cranking out two million dollar homes around here and not one has sold in eight months. Everyone is outdoing themselves with prices and I haven't seen any sales.  That's what I call irrational exuberance.

JRobby's picture

That's funny.

They must think it's 2005 / 06?

Stated / Stated loans did the most to push the price peaks on $500 to $2 million homes. Then they fell the farthest when the bubble popped.

Those loans are not around anymore so.......

mickrussom's picture

Liar loans and other crap loans are making a comeback now. Hear it on the radio.

HRClinton's picture

Not sure I trust the analysis of a guy, who lacks the thoroughness and attention to detail, to miss the spelling mistake in Fig.1:

"incrementnally", really?

 

Eagle40's picture

Chill Libtard....It was probably a typo from his phone. The keyboards are hard to maneuver and the spell check is not always accurate. Libtards always go after the spelling and grammar while they never can argue on logic or substance.

Now go ahead and proff read my comment. Let us try go find a mistake. Quite frankly Charlotte I dont give a fuck. 

j0nx's picture

Move to DC area. No downturn here. All area driven.

Ramesees's picture

James Madison and Thomas Jefferson, Virginians, understood that DC would always be a source of money flow.  They had Virginia's interest in mind, but it's too bad the federal government has become so corrupt and has poisoned the beautiful Northern Virginia landscape with its treacherous federal leeches.  

pelican's picture

Guess what... in many places it never recovered from 2008.  My street has numerous houses in forclosures which the banks haven't moved on.  Nine years later, they still haven't forclosed.

They keep them off the market to try to keep properity values up.

 

It is all smoke and mirrors.  

Be very careful before you buy a home.  Find out home many hidden foreclosures are in limbo.

CJgipper's picture

The free FED money is driving the shadow inventory phenomenon.  Back in teh day, the goal was to turn them as fast as possible so that you lost as little as possible on maintenance costs.

zeroedgesd's picture

When this thing pops it will be ugly. 

JohnGaltUk's picture

Very ugly because they never solved the issues that caused the first GFC.

Governments and CB's thought they were taking the easy way out and now we have to deal will hell.

JRobby's picture

Hedgies, Private Equity and "other surrogates" stepped up to buy up the "shadow inventory" with low interest loans.

What's it going to be this time?

Fredo Corleone's picture

Commercial construction is every bit as frothy.

all-priced-in's picture

So - good time to get a mortgage on my home and invest it in FANG?

 

 

 

swmnguy's picture

FANG??!!??  That's so 2014.  You missed out on Theranos, so either buy Tesla or save up for Uber's IPO. 

booboo's picture

fuck that, I am selling crypto homes to twenty somethings on letgo, I carry the note at 4% and they pay in bitcoin. Everyone qualifies. They have to provide the cloud storage for the home, the upside is there is no property tax.

Fredo Corleone's picture

I would like to see Bill Banzai do a visual representation of this post. Keyboard warning would be in effect.

+1

XBroker1's picture

"the upside is there is no property tax."

'For now'...

NugginFuts's picture

But my real estate agent says property values only go up and I don't want to be priced out of the sweet new McMansions that crew of Mexicans is building up the road....

JohnGaltUk's picture

Its just a tiny dip at the moment.

techpriest's picture

Lots of great deals are coming - make sure you are on the right side of them.

Give Me Some Truth's picture

ZH ran story a week or so again. If memory serves, home prices were rising in about 120 markets, but falling in 180 markets. Good for the sellers in perpetually hot markets like Dallas, Denver and San Fran. 

Bad for the sellers in all the markets in fly-over country or the hinterlands.

I think the truth is there is (was?) a "housing bubble" where the beautiful people live, but a housing recession where the commoners live.

(I wonder if there is a housing bubble in Allentown ... or Preoria).

JRobby's picture

People moving away from high tax areas and no job areas.  120/180 sounds right.