Morgan Stanley: We don’t see housing bubbles

TRD NEW YORK /
Feb.February 02, 2014 03:00 PM

 Economist Robert Shiller warned all of us of the U.S. housing market bubble before the bubble eventually burst.

So, people took notice when Shiller said that some local housing markets in the U.S. were looking “bubbly.” He’s pointed his finger repeatedly and specifically to Phoenix and Las Vegas where prices have roared back. The credit analysts at Morgan Stanley, however, disagree with these concerns.

“While there are clear geographical variations in the pace of recovery, we do not find ‘bubbles’ across a wide range of regional housing markets,” wrote analysts led by Vishwanath Tirupattur. They begin their argument by noting that home prices nationally are 19.94% below their peaks.

“While we do not suggest that the pre-crisis peaks were not bubbly, the fact that we are almost 20% below levels attained eight years ago tells us that, at least at the national level, it would be hard to categorize the rise in home prices as a bubble,” they wrote.

This is the framework they use to defend today’s hotter metropolitan statistical areas (MSA).

“[T]he MSAs that endured the most serious declines in home prices have also rebounded the most. Home prices in MSAs such as Las Vegas, Phoenix and Miami – now regarded as the banner cities for pre-crisis ebullience for housing, recording declines in the 50%+ range – have shown notable rebounds, with price increases in the 30-45% range. Still, they are 35-45% below their pre-crisis peaks. Of the 20 MSAs we look at in Exhibit 1, San Francisco stands out, with a near 50% appreciation in prices since the trough. Still, it is 18.06% below its pre-crisis peak…”

“Besides illustrating the non-symmetric nature of arithmetic averages, this helps to show that, even at a more granular level, the bubble talk seems premature, in our view,” they wrote.

Unfortunately, asset price bubbles never look like bubbles until after they burst.


Related Articles

arrow_forward_ios
Around 27 percent of homeowners who responded to a Bankrate study said they don’t know what the interest rate is on their home (Credit: iStock)

One quarter of Americans don’t even know their mortgage rate

The 30-year fixed-rate average fell to 3.45 percent (Credit: iStock)

US mortgage rates hit 3-year low

Home buyers have for decades been advised to never put a less than 20 percent down payment on a house, but 70% of young home-buyers are willing to break that rule this year (Credit: iStock)

Millennials are ready to break the golden rule of home-buying

From top: London, New York and Hong Kong (Credit: Unsplash)

Global housing markets are syncing up — and slowing down

Is January the new April for real estate? (Credit: iStock)

Low mortgage rates could mean another hot winter in the housing market

Harbor Group International's Jordan Slone and Kushner Companies's Charlie Kushner  (Credit: Sasha Maslov, Harbor Group)

Multifamily still delivers as investors avoid rent control

The U.S. is short 3.8 million new homes

US is short nearly 4M new homes: report

Budapest (Credit: Pixabay)

This European city has the world’s fastest rising home prices

arrow_forward_ios
Loading...