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Is There Another Housing Bubble?

Captain Capitalism
June 14, 2016
Because of the news and talk and social media and anecdotal stories about the return of NINJA loans, people have been asking whether there was another housing bubble and whether we could expect another crash.  So, since this has become an increasingly common question, I decided to put some research into it and the answer is

"No, not really."

The primary measure by which we gauge whether or not housing prices are sane is the "price to rents" ratio.  Very much like a "price to earnings" ratio for stocks, the price to rents ratios does the same thing by comparing the value of a house versus the rents it can generate.  And if we look at this ratio today we can see that though a touch above historical averages, housing prices are nowhere near a bubbly as they were in 2006:
price%2Bto%2Brents.PNG

























Normally I would stop here because this would provide the definitive answer, but whereas the above chart looks at the demand for housing that drives values (rents), I also like to look at the other side of the economic equation - supply.  And here, once again, we are nowhere near the insane levels of supply we endured in the mid 2000's:

housing%2Bstqarts.png





















So while yes, there is technically a bubble, I would not be freaking out just yet about an imminent housing collapse like we saw in 2007.  I would be more worried about the collapse of our currency than the collapse of housing prices at the moment.

TheRedArchive is an archive of Red Pill content, including various subreddits and blogs. This post has been archived from the blog Captain Capitalism.

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