Home Prices Are Rising. Is That Recovery, or a Bubble?
Home prices are still rising according to the latest NAR data showing a monthly gain of 1.3% and 9.9% year to year increase in December. That’s consistent with a wide variety of home price measures, including the real time index of listing prices reported by DepartmentofNumbers.com. That index has proven to accurately depict real time market conditions, later verified by the closed sales data which lags the contract date by at least 3 months. Case Shiller’s lag is even worse. Because of its extreme, and unnecessary, smoothing methodology, it has a built in lag of around 5 1/2 months.
Home Prices Rose in Lagging NAR Data
The NAR’s data for December represents contracts done in October and November, leaving us to wonder exactly where the market is now. The uptick in listing prices suggests that it is still trending upward. That’s not the only evidence, however,Â
Home Prices- Click to enlarge
Home Prices Rise in December Real Time Data
Redfin.com, an online real estate brokerage, reports real time contract prices for the previous month from the 19 large metros in which it has offices. That data is released about 3 weeks after the close of the current month. As with the other indicators it shows a seasonal decline in the second half of 2013. The markets in which it operates are highly desirable metros on both the East and West Coasts, with a few hot heartland markets also included. If there are bubbles, it will show up in their price indicator first, and more than in the broader market measures like the NAR’s. The blue line in the chart above depicts the Redfin index. It’s pretty clear from that, that local bubbles are raging in desirable markets. Redfin shows the median price in the markets in which it operates has risen 13% in the past year on top of a 16% gain in 2012. The month to month gain in contract prices in December was 0.8%. It shows year to year gains of 20% or more in 2013 in 7 markets in December, of which 5 were in California. The other two were Phoenix and Las Vegas. Sound familiar?
