Mark Hanson Reveals "The Next Housing Bubble"

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.

Comments

SilverRhino Life of Illusion Fri, 07/28/2017 - 00:59 Permalink

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.    

In reply to by Life of Illusion

Paul Kersey Undecided Thu, 07/27/2017 - 16:59 Permalink

"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.

In reply to by Undecided

devnickle Paul Kersey Fri, 07/28/2017 - 03:00 Permalink

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?

In reply to by Paul Kersey

runningman18 Undecided Thu, 07/27/2017 - 18:36 Permalink

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.  

In reply to by Undecided

robobbob petar (not verified) Thu, 07/27/2017 - 17:16 Permalink

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.

In reply to by petar (not verified)

Creative_Destruct petar (not verified) Fri, 07/28/2017 - 03:53 Permalink

 "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.

In reply to by petar (not verified)

I am more equa… petar (not verified) Fri, 07/28/2017 - 08:39 Permalink

  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. 

In reply to by petar (not verified)

Eagle40 HRClinton Thu, 07/27/2017 - 14:00 Permalink

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. 

In reply to by HRClinton

Ramesees j0nx Thu, 07/27/2017 - 12:36 Permalink

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.  

In reply to by j0nx

pelican HisNameIsRP Thu, 07/27/2017 - 16:17 Permalink

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.

In reply to by HisNameIsRP

NugginFuts Thu, 07/27/2017 - 11:19 Permalink

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....

Give Me Some Truth Thu, 07/27/2017 - 11:26 Permalink

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).