Housing Bubble?

I found an interesting article today on HousingWire.com:

The most important chart in housing right now

As the title suggests, there is a chart at the heart of the commentary:

The graph shows Case-Shiller Price Indices for the 20 metro areas S&P tracks.  I’ll get to Austin in a bit, but for context, notice that the worst-performing MSA was Las Vegas, NV, where home prices declined about 62% from the peak of the last market cycle to the trough of the most recent recession, and where home prices remain more than 45% lower than the last market peak.  In contrast, the best-performing Case-Shiller metro was Dallas-Ft. Worth, TX, with the peak-to-trough decline was closer to 15%.  Moreover, home prices in D/FW are UP about 5% compared to the last peak.  (NOTE:  “Now” in this analysis is October, 2013, the most recently reported Case-Shiller data.)

How does Austin compare?  Peak-to-Trough:  -12.6%.  Peak-to-Now:  +7.7%.

Housing bubble?  Reading reports of how quickly home prices have increased around the country, it would be easy to think so.  I agree with HousingWire, however, that this historical context is important.  Home prices in most major U.S. cities are still lower than the last market peak.  That is not the definition of a bubble.

Prices in Austin have increased rapidly, but not as fast as most cities that really experienced the downturn.  (We didn’t.)  Even with extremely strong demand (100 to 150 new Austinites/day?) and very limited listing inventory, multiple offer situations, etc. the average price in the metro area in October 2013 was up just 2% compared to October 2012.  (Data from TAMU Real Estate Center.)

By all appearances and forecasts, 2014 promises to be another very busy year in Austin-area real estate.  Real-world pricing data does not indicate a new bubble here, though, and healthier regional economies elsewhere around the country will be good news for all of us.