Are we really back to “bubble” prices?

We’re back at the peak of the market. Well, that’s what some of the national indexes are saying. So imagine yourself in line at Starbucks and someone remarks, “I heard on CNN we are back to bubble prices.” What would you say? Let’s look at some of the “national” trends below and then kick around a few thoughts. I’d love to hear your take in the comments.

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Case-Shiller National Index: This index shows the “national” market is about where it was during the peak of the index in 2006 (source).

case-shiller-national-index-by-sacramento-appraisal-blog

Freddie Mac National Price Index: This index shows the “national” market is about where it was during the peak of the index in 2007 (source). 

freddie-mac-price-index-united-states-sacramento-appraisal-blog

Freddie Mac California Price Index: The “national” index in gray shows we are back to the peak of the market, but the state index in black shows California is still about 5% below the peak (source).  

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Freddie Mac Sacramento Price Index: The national index in gray shows we are back to the peak, but the local Sacramento index in black shows we are still a ways off (source).

freddie-mac-price-index-sacramento-sacramento-appraisal-blog

Some quick thoughts:

1) I want to buy in the national market: There is no such thing as a national market, which makes “national” indexes only so valuable (or sometimes totally useless). As Jonathan Miller says, real estate is local and we have thousands of local markets instead of one national market. Therefore we ought to be naturally cautious about national metrics (see Barry Ritholtz rip NAR’s affordability index). In short, I watch “national” indexes, but I look to the local market for the real trend.

2) Different Peak: The “national” market peaked around 2007 depending on which index you’re looking at, but Sacramento peaked in 2005. Media outlets often talk about the housing “bubble” bursting in 2007 when in fact that wasn’t true for many markets (including Sac).

3) Current Values: Many Sacramento neighborhoods are still a good 10-15%+ below the peak of the market, though some classic areas are getting very close (while other depressed areas have much further to go). I included some neighborhood graphs below for reference.

4) Condos & Land: Let’s remember not all property types trend the same way. For instance, the condo market has struggled since the housing “bubble” burst. Owner occupancy rates being too low have stalled many complexes from obtaining financing, which has stalled value increases too. Vacant land is also far below where it was at the peak because there is less new construction today and we don’t have land speculators like we did 10+ years ago. 

Specific Neighborhoods (Are we there yet?):

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I hope this was helpful.

Questions: Are there any national metrics you pay attention to? Any you’d recommend avoiding? Did I miss something? I’d love to hear your take.

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