U.S. housing prices resumed inflating through the end of 2013, however, they don't appear to have anywhere near the head of steam they did from July 2012 through July 2013.
Let's first update our look at the long term trends for U.S. median new home sale prices with respect to median household income from 1967 through the end of 2013. Here, by tracking the trends of median new home sale prices with respect to median household income, we can more easily identify how relatively affordability of the prices of new homes in the middle of the U.S. sales distribution are changing with respect to the household incomes of people who are in the middle of the U.S. income distribution. This is what allows us to identify when bubbles might be present in the U.S. real estate market:
Here, we see that the first U.S. housing bubble really began to inflate after November 2001, peaking in March 2007, then basically deflating until January 2010. Median new home sale prices then grew slowly and steadily with household incomes until July 2012, which is when we mark the beginning of the second U.S. housing bubble.
Let's next zoom in on the box in the upper right hand corner of our first chart, which shows the detail from 1999 onward:
This chart shows how median new home sale prices stalled out from July through September 2013, coinciding with the period where mortgage rates rose in anticipation of the Federal Reserve beginning to taper off its purchases of U.S. Treasuries and Mortgage-Backed Securities in its Quantitative Easing (QE) programs. Following the Fed's decision to delay any taper in its QE programs until later, the inflation of median new home sale prices reignited in October as mortgage rates fell in response.
Political Calculations is a site that develops, applies and presents both established and cutting edge theory to the topics of investing, business and economics.
Be the first to read Political Calculation's column. Sign up today and receive Townhall.com delivered each morning to your inbox.
In Other News: North Korea Threatens to Hack US if We Don't Acknowledge Their Innocence in Hack Attacks | Michael Schaus