Saturday, October 23, 2021

Bubble Watch: 1st dive in 7 months for Southern California home prices

“Bubble Watch” digs into trends that could point to economic and / or housing market problems.

Lightning: Southern California average home prices have risen for six consecutive months before falling from July to August. The six-month “winning streak” is fairly significant because there have been only three long series since 1988.

Source: My trusted spreadsheet analyzed DQNews’ monthly average home price data for six counties in Southern California – based on closed transactions.

Trend

Let’s first note that seeing changes from month to month is not a great comparison for long-term analysis. Because since 1988, prices have risen only 53% in 392 months, so any one-month price swing can be seen as a coin toss.

That said, the six-county jumped 14 1,000 to $ 680,000 in August after a six-month improvement from $ 595,000 in mid-January to a -14% jump. However, all six of these 2021 growths have set new record highs for this price benchmark.

So when did we have a winning streak? (I apologize to the resident hunters for not knowing that they have long been seen as “winners.”)

Longest continuity? Eight months ending in September 2012, in the first days of the Great Depression. Prices have risen 21% during this period.

The next longest? The two-seven-month continuity was both in the big-bubble period, with a 21% profit ending in August 2003; And as of August 2005, 13% profit.

Like the 2021 series, there has been a two-month increase in six more months. 1 ending in July of the year, 1 12% increase near the end of the bubble in the late 1980s; And another end in July 2017, which increased by 10%.

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Separation

Simply put, this type of increased uptake occurs a little more than 1% of the time – so they are a real rarity.

Uniqueness aside, what do these lines tell us?

Let’s take a look at what happened after these five previous series ended, noting that prices have gained an average of 5.2% since 1988.

12 months later: Prices have risen after five long periods, above an average gain of 12.4%.

Second year: Again, five gains – with a modest 6.7% average increase.

Third year: One drop – following the 2005 continuum – with five average 2.4% losses.

Fourth year: Two drops 200 2005 and 1988 পাঁচ five average sub-equivalents with a 1% gain.

What bubbles?

Five bubbles (five-alarm warning) from the scale of zero bubbles (no bubbles here). One bubble!

Since 1988, these winning stacks in a short period of time have been signs of upward inflation. But I rated them one-bubble “low risk” because we saw a long continuity of monthly profits in the late 1980s and early 2000s in the early bubble formation.

Also, this history reminds us that gains may not last forever – average gains and even declines can be observed after previous long sws.

The most recent winning series offers a brewing peak for local housing appreciation rates in late August.

Jonathan Lansner is a business columnist for the Southern California News Group. He can be reached at [email protected]

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