Comments on a Seeking Alpha article, “No Housing Market Bubble”

It’s difficult to imagine any protracted housing slump when inventory remains low

I came across an article earlier today that was posted on Seeking Alpha titled, No Housing Market Bubble, and wanted to pass it along to the reader.

I won’t comment much on it, except to say that most of the observations the writer enumerates are exactly what we have been discussing for the past three-plus years on this blog.

Real house prices have been rising, but we need to consider that the real rate of inflation is higher than what BLS publishes. Thus, the growth in real house prices is lower than what the chart shows

While the national housing data in aggregate have pointed to slowing price growth, the underlying fundamentals remain favorable. Restricted supply and favorable demographics (mass immigration) continue to support prices and rents. It remains to be seen if home builders can keep ramping up inventory over the next couple of years to meet the latent demand.

House price growth, when viewed through the growth in rental rates, seems more tame

The conclusions of the author of the Seeking Alpha article mirror what I have been observing. While there are a number of areas around the country that I think are somewhat hot (e.g. San Francisco, Denver, Seattle), the overall market is fairly balanced. In some respects I think the majority of the markets are very reasonably priced, especially with respect to rents.

Any types of quantitative easing operations will only work to enhance the support of the housing market over the longer-term.