“Bubble Watch” digs into trends that may indicate economic and/or real estate market troubles ahead.
Buzz: Bay Area housing doesn’t look very frothy when compared with other large U.S. housing markets.
Source: The Bubble Watch Index is my trusty spreadsheet analysis of April homebuying data from Zillow and Realtor.com covering 47 big markets. The scorecard is based on average rankings for overvaluation (listing prices vs. values); overheating (list-price gains vs. value increases); selling speed (days on market vs. a year ago); year’s inventory change; and year’s rent change.
The Bubble Watch Index grades the Atlanta metropolitan area ($392,000 median list price) as the nation’s frothiest market followed by Detroit ($285,000); and Jacksonville ($349,000). Next came a tie of Southern California’s Riverside and San Bernardino counties ($512,000) and Tampa-St. Petersburg ($327,000).
The Washington, D.C., region ($506,000 median) had the lowest bubble score followed by Minneapolis-St. Paul ($366,000); and New York City-New Jersey ($629,000). Then came San Jose ($1.24 million); Seattle ($679,000); and San Francisco ($1.06 million).
Folks seem willing to pay up dramatically in more “affordable” markets, part of a buying frenzy fueled by low mortgage rates and limited choices for house hunters.
The index shows less overpayment happening near the expensive coastlines.
Consider the ranking of the five Golden State markets in the Bubble Watch Index where three million-dollar markets were far down this risk measurement.
The San Jose region was ranked No. 44 out of 47 for “frothiness” …
Pricing: $1.24 million list price vs. $1.36 million value or 9% undervalued — 46th lowest of the 47 metros studied.
Appreciation: 3.3% list vs. 5.9% value or 44% cooled — No. 34.
Sales speed: 22 days on market, down 37% in a year — No. 20.
Inventory: Down 11% in a year — No. 46.
Rents: Down 7% in year — No. 45.
No. 42 was San Francisco-Oakland …
Pricing: $1.06 million list vs. $1.24 million value or 14% undervalued — last of 47.
Appreciation: 13.6% list vs. 7.4% value or 84% overheated — fourth-highest.
Sales speed: 27 days on market, down 33% in a year — No. 29.
Inventory: Down 6% in a year — last of 47.
Rents: Down 8% in a year — last of 47.
No. 32 of the 47 was Los Angeles-Orange counties …
Pricing: $1.11 million list vs. $783,610 value, or 42% overvalued — eighth-highest of 47.
Appreciation: 23.6% list vs. 10.4% value, or 127% overheated — tops of 47.
Sales speed: 49 days on market, down 17% in a year, above — No. 44.
Inventory: Down 22% in a year — No. 44.
Rents: Up 1% in a year — No. 39.
No. 11 was Sacramento …
Pricing: $592,000 list vs. $507,735 value, or 17% overvalued — 33rd highest of 47.
Appreciation: 18.6% list vs. 14.3% value, or 30% overheated — No. 11.
Sales speed: 21 days on market, down 45% in a year — No. 11.
Inventory: Down 54% in a year — No. 24.
Rents: Up 10% in a year — No. 9.
And the state’s riskiest market, by this math, was No. 4 Riverside-San Bernardino counties …
Pricing: $512,000 list vs. $460,833 value, or 11% overvaluation — 41st highest of 47.
Appreciation: 22% list vs. 16.2% value, or 36% overheated — No. 10 largest gap.
Sales speed: 28 days on market, down 50% in a year — No. 7 drop.
Inventory: Down 64% in a year — No. 11 decline.
Rents: Up 15% in a year — No. 1 increase.
Are house hunters getting skittish?
Every month since 1978, the Conference Board polls U.S. consumers and asks “Do you have plans to buy a home in the next six months?”
In May, only 4.3% of those surveyed said yes, the lowest level since February 2013 and down from 7.1% a month earlier; 6% a year ago; and a five-year average of 6.3%.
On a scale of zero bubbles (no bubble here) to five bubbles (five-alarm warning) … THREE BUBBLES … for California.
Remember, the Bubble Watch Index reflects relative exuberance among these markets. And as I often say, these kinds of rankings are part art and part science. So the beauty of any conclusion drawn from this analysis is definitely in the eye of the beholder.
If you’re the type who thinks today’s overall homebuying conditions are sustainable, I’ll bet you sell real estate. You’d probably argue the top rankings are simply the nation’s “hottest” markets.
However, if you’re like me and are squeamish that homebuying has become a tad irrational — plus, you’re a Californian — here’s some solace: the Golden State isn’t leading this unnerving buying binge.
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at email@example.com