The First Anniversary of the Second U.S. Housing Bubble

The second U.S. housing bubble has been inflating for just over a year now!

July 2012 marks the zero point for the inflation phase of the new housing bubble, with its expansion really beginning to take off in August 2012. And now, since we have the latest median household income data for the month of July 2013, we can show just how much it has inflated as it reached its first birthday!

Our chart above shows the data and trends for the non-inflation-adjusted twelve-month trailing averages of both median new home sale prices and median household income for each month since December 2000. In looking at the current trend, since July 2012, the median sales price of a newly constructed home in the United States has gone up by just over $25 for every $1 that median household income in the United States has increased.

That's almost 20% faster than the $21-to-$1 rate that the first U.S. housing bubble inflated on average from November 2001 through September 2005!

We'll close this edition of our ongoing series exploring the inflation of the second U.S. housing bubble by looking at the long-term view of what established equilibriums for median new home sale prices really look like in the United States, which is how we really know that what is going on in the U.S. housing market is really a bubble:

Since 1967, median new home sale prices in the U.S. have typically increased by anywhere from $3.37 to $4.09 for every $1 increase in median household income in the absence of any periods of bubble inflation or deflation in U.S. housing markets.

At its first anniversary, median new home sale prices in the second U.S. housing bubble are inflating at a rate that's over six to seven times greater than those typical levels!

But perhaps more telling about the now one-year-long escalation in median new home sale prices, is that the next time we feature an update about the second U.S. housing bubble, we're going to need to adjust the vertical scale of our charts so they can contain the newest data.

References

Sentier Research. Household Income Trends: July 2013. [PDF Document]. 2 September 2013. Accessed 2 September 2013. [Readers should note that we have converted all older inflation-adjusted values presented in this source to be in terms of their original, nominal values (a.k.a. "current U.S. dollars") for use in our charts, which means that we have a true apples-to-apples basis for pairing this data with the median new home sale price data reported by the U.S. Census Bureau.]

U.S. Census Bureau. Median and Average Sales Prices of New Homes Sold in the United States. [Excel Spreadsheet]. Accessed 2 September 2013.

Previously on Political Calculations

We were among the first to declare that a second housing bubble was forming in the U.S. economy, and we were the first to back it up with an objective framework of analysis and data. Our ongoing analysis is chronicled below....

• The U.S. Housing Bubble Is Back - we apply our groundbreaking analytical methods to determine that a new housing bubble has begun to inflate in the U.S. economy.


• Fuel, Oxidizer and a Spark - Part 1 - we revisit the origins of the first U.S. housing bubble and identify the factors that ignited it.


• Fuel, Oxidizer and a Spark - Part 2 - we explain why housing prices rose so much more in just four states than they did elsewhere.


• Fuel, Oxidizer and a Spark - Part 3 - we examine the factors that kept the first U.S. housing bubble going, even after the Fed acted to stop throwing so much fuel on the fire.


• Confirming the Second U.S. Housing Bubble - using revised data, we confirm that there is no apparent new-year slowdown in the inflation phase of the new U.S. housing bubble.


• As the Housing Bubble Inflates: Month 9 - we use hard data to refute the housing bubble deniers!


• As the Housing Bubble Inflates: Month 10 - we note the fourth consecutive record for median new home sale prices and discuss the spark that set off the second U.S. housing bubble.


• Setting the Baseline for a Better Housing Affordability Index - how affordable is your home when compared with every other American homeowner? We create a new index to answer that question for any household income level.


• As the Second U.S. Housing Bubble Inflates: Rapidly Escalating Prices - each revision of median new home sale prices indicates the second U.S. housing bubble is growing even faster than the first!


• The Sales Mix of the New Housing Bubble - we find that just like in the first U.S. housing bubble, the sales mix of new homes in the second U.S. housing bubble is being distorted in a very similar way.


• The First Anniversary of the Second U.S. Housing Bubble - we mark the first birthday of the second U.S. housing bubble.