Has the U.S. housing bubble begun to reinflate?
In the past several months, there has been a lot of speculation to that effect, but so far, no one other than David Stockman has really come out and committed to an affirmative answer. And even Stockman didn't specify when such a new bubble in the U.S. housing market might actually have begun.
But what really sparked our interest in this topic today is the unexpected strength in the number of initial unemployment insurance claims being filed during the last several weeks, which along with the strength of the construction industry cited in the latest employment situation report, suggests that the U.S. housing industry is finally growing signs of robust growth, at least as measured by rising sale prices for homes.
Unfortunately, the apparently robust growth of housing prices in the last several months is suggestive of something other than fundamental factors at work. Fortunately, we developed an early detection method that might be used to confirm if a bubble is present in the housing market and if so, to identify specifically when it began. So, we're going to revisit the data once more to see just what might be brewing under the surface of the U.S. housing sector.
In doing that, we're going to push the envelope with our methods, as we'll be tapping new sources of data for median new home sale prices and median household incomes, in which these data items are reported monthly.
Let's get to work. Our first chart reveals the trailing twelve month average of the median sale prices of new homes sold each month in the United States from January 1963 through January 2013, as reported by the U.S. Census Bureau. The first data point spans the 12 months from January 1963 through December 1963, the second data point spans the 12 months from February 1963 through January 1964, et cetera.
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