For years, we've been arguing about whether there's a housing bubble or not.* * Even today, people will still try to argue that only isolated pockets of the country are a bit frothy.
Now that it looks like the bubble is about to deflate, I've been trying to get a handle on the size of the problem.* * I gotta tell you -- I am blown away by the size of this thing.* * I need somebody to calm me down and tell me I'm looking at bad data or something.
I lived through the SoCal bubble that popped from 1990-1996, so I know bubbles.* *Prices dropped about 20% during that decline.* *At the end of the decline, prices had basically reverted to the historical mean on an inflation-adjusted basis.* * Take a look at this chart of San Diego prices, and you can see that bubble compared to our current bubble:
San Diego
Here's the same chart on a national scale:
National
Here is a chart of housing stocks compared to the S&P500 and NASDAQ bubbles of 2000:
Housing Stocks
Finally, here's a chart of the total housing value vs GDP:
Housing vs GDP
The interesting part of this last chart isn't so much the exponential curve -- take a look how housing is way off it's normal relationship to GDP.* *We were at 160% of GDP last year, whereas we're normally closer to 100% GDP.* * I believe Japan was at about 140% of GDP when their real estate market crashed for 16 years....
So, my worry is that this isn't going to be a pleasant sideways deflation.* * By every metric, this appears to be bigger than anything we've experienced before -- even bigger than Japan's bubble.
Tell me I'm wrong.
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