As an active Realtor, I’m constantly on the look out for signs of shifts in market conditions. When it comes to the National Association of Realtors (NAR), everything they say should be taken as gospel, NOT!
One of the reasons I became a real estate broker was that I was fed up with the perennial cheerleading from the NAR. Promoting a profession is one thing, willfully disregarding reality to service its member is a sin, making the NAR as culpable as the NRA for performing a disservice. I felt that home buyers and sellers deserved the same rigorous and disciplined analysis of the housing market that is being done by the wealthy bankers on Wall Street. I’ll bet you they don’t follow the NAR’s advice in figuring out how to make billions on the housing market.
So, when the chief economist/propagandist of the NAR, Lawrence Yun, declares there’s NO HOUSING BUBBLE IN SIGHT, I find myself suddenly in a cold sweat. For some reason, his opinion has been a sharp prognosticator of exactly the opposite of what happens. He put out similar articles during the peak of the last housing bubble in 2006-2007, saying essentially the same thing: It’s different this time. Back in 2006-2007, he saw no housing bubble given the boom in household creation and a robust job market, both driven by record monetary liquidity and financing. Today, he’s seeing a similar robust job market as we’ve once again found ourselves flush with loose monetary policies.
Since he made the same calls, I’m looking for signs of a housing bubble popping. So far, I can see that to a certain extent, he may be right. Most of the US has not been caught up in the housing recovery and boom since 2008. Hence, there’s literally no bubble to pop, at least not on the national level. But, in local submarkets, there are signs that home prices are getting unsustainable even with strong employment. What Lawrence Yun twisted around was inferring a low housing sales volume today as a sign that there’s more potential demand. However, sales volume has no bearing on bubble conditions, record high prices and lots of debt are the right signs. To that end, we do see lots of coastal submarkets (Miami, NY, Boston, LA, SF, Seattle) around the US on a tear, with prices for the few homes for sale going way beyond the last housing price peak in 2007. These submarkets exhibit potential bubble conditions.
Yet, just because prices are high doesn’t mean they’ll automatically or immediately come down. In several of these submarkets, SF in particular, price increases are being driven by higher incomes from strong employment, as compared to areas like Miami which are more driven by speculation and foreign investments.