Are Seven Bubbles Bursting?

June 1, 2015 in Market Analysis 1 Comment

Eyes opened wide Monday morning when headlines popped up in in-boxes across the nation from Clear Capital, a data and analytics firm that usually is the first to report monthly sales and prices.. Instead of the normal “prices up or down, sales up or down” report, the data analytics firm released May’s first take with a bombshell, or seven bombshells, to be exact.

Outside of the usual headline-making markets, there are seven markets, considered “major” in density and culture, which are in bubble territory, Clear Capital. said. These markets have had two years of consecutive quarterly softening, meaning each subsequent quarter, over the two year period starting May 2013, has seen less growth than the previous quarter. “We’ve ruled out seasonality since two summers and winters have gone by with no observed impact on the softening,” the report opened.

“At the surface, May data is serving up more of the same, which is an interesting indictment of the economic uncertainty facing the industry,” says Alex Villacorta, Ph.D., vice president of research and analytics at Clear Capital. “Small increases or declines in quarterly gains reflect both the normalization off of the ‘correction-to-the-correction’ and the uncertainty of the health of the housing market. These small changes track well with what we forecasted at the start of 2015—continued moderation and year-end gains of between 1% - 3%. But as we know all too well, there’s no such thing as standard fare in housing. Each micro market has its own flavor and prices.

“While it may come as no surprise that key markets with booming tech economies, like the San Francisco Bay area, are in bubble territory, there are seven others that meet our same definition of a bubble (Graph below). After two years of moderating gains, originating from the optimism of once-in-a- lifetime deals, quarterly growth has decreased, stagnating to less than 1% in all markets except the Riverside, CA MSA and Miami, FL MSA after observing an average rate of 4.4% two years ago. Seven markets is certainly cause for concern and cumulatively bubbles bursting across the nation could put the June and spring rush for housing on the back burner.”

Highest Performing Major Metro Markets
Rank	Metropolitan Statistical Area	Qtr/Qtr % +/-	Yr/Yr	Distressed Saturation
1	Las Vegas, NV — Paradise, NV	1.8%	6.4%	20.1%
2	Seattle, WA — Tacoma, WA — Bellevue, WA	1.7%	10.3%	14.4%
3	Houston, TX — Baytown, TX — Sugar Land, TX	1.6%	11.5%	5.3%
4	Denver, CO — Aurora, CO	1.5%	10.9%	8.3%
5	Pittsburgh, PA	1.5%	14.2%	12.0%
6	Miami, FL — Ft. Lauderdale, FL — Miami Beach, FL	1.3%	9.8%	26.6%
7	Los Angeles, CA — Long Beach, CA — Santa Ana, CA	1.3%	8.1%	10.4%
8	San Francisco, CA — Oakland, CA — Fremont, CA	1.3%	9.1%	7.5%
9	Phoenix, AZ — Mesa, AZ — Scottsdale, AZ	1.2%	5.9%	12.3%
10	Fresno, CA	1.2%	8.3%	17.6%
11	Nashville, TN — Davidson, TN — Murfreesboro, TN	1.2%	8.7%	11.0%
12	Riverside, CA — San Bernardino, CA — Ontario, CA	1.1%	8.0%	13.8%
13	Sacramento, CA — Arden, CA — Roseville, CA	1.1%	7.1%	14.6%
14	San Diego, CA — Carlsbad, CA — San Marcos, CA	1.0%	6.1%	10.0%
15	Portland, OR — Vancouver, WA — Beaverton, OR	1.0%	7.2%	11.2%