What a bursting bubble looks like

or, what housing recovery?by Igor Rivin

• A few days ago, I was browsing Trulia’s listings in Princeton, and noticed that they have a rather useful summary of recent housing activity: price and the number of sales.

It looked like this:

Some observations

• The housing decline started in 2006 (a fair bit before the stock market decline).

• The prices (in Princeton) never really collapsed, but sales declined precipitously.

• The decline does not look precipitous, but that’s because Trulia uses a log scale! Keep that in mind for the rest of this little study.

So, I decided to look around the country, and see. The cities

in the following slides form a reasonable cross-section.

Providence, RI

Prices peaked in 2006, never recovered, sales down by factor of 5 from peak.

Lowell, MA

Both prices and sales collapsing(sales by a factor of 30!

prices by almost a factor of 3)

Philadelphia, PA

Prices essentially flat from 2008,sales off by a factor of four!

Atlanta, GA

Prices back to 2007 peak,sales off by almost a factor of 3

Orlando, FL

Prices off 40% from peak,sales down by factor of 5!

Miami, FL

Prices down 30% from 2007 peak,Sales off by factor of 5!

Phoenix, AZ

Prices down 30% from 2007 peak,sales down by factor of 3!

Sacramento, CA

Prices off by 40%,Sales off by factor of 2.5

Modesto, CA

Prices off by factor of 2 from peak,Sales off by factor of 3

San Jose, CA

Price: almost back to peakSales: down factor of 2.5

San Francisco, CA

Prices: up by 20%! Sales down by factor of 2.5!

Minneapolis, MN

Prices: down 15%,Sales: down a factor of 2

Seattle, WA

Prices: Up slightly,Sales, down by factor of 2!

New York, NY

Prices: up slightlySales: down by factor of 2(very hard to tell visually)

The Moral of the story

• Sales are down, and the fall is accelerating.

• Prices have recovered (we did not factor in inflation, by the way) in New York and San Francisco — the wealthiest cities in the country.

• Why? Because Fed’s money printing is causing an asset price bubble, but the vast majority of the population can’t afford the asset.