Here’s Why Economists Are Worried About A New Housing Bubble
After posting their 39th consecutive month of year-over-year price gains, home prices in 33 states and the District of Columbia are at or within 10 percent of record highs, according to a report issued today by CoreLogic.
Home prices increased 6.3 percent year-over-year in May, and 1.7 percent month-over-month. Relatively low mortgage rates have helped fuel the price gains. In cities like San Francisco, where there is limited supply and high demand, prices are growing at a double-digit clip.
Prices are so high in certain areas that some economists are starting to worry about localized bubbles. The number of homes on the market is increasing slightly. Total housing inventory at the end of may reached 2.29 million houses, 1.8 percent more than this time last year, according to the National Association of Realtors. That’s a 5.1-month supply, giving sellers a slight edge in today’s market. (A six-month supply is considered a healthy market.)
Related: Get ready for Another Real Estate Bubble
South Carolina saw the biggest price gains, with homes showing annual appreciation of 10.3 percent. Other states showing big gains were Colorado (9.8 percent) and Washington (8.8 percent), CoreLogic reports.
High prices have also spurred builders to start constructing new single-family homes, sales of which increased 23 percent year-over-year in May.
While most states have seen price gains, five states (Massachusetts, Connecticut, Maryland, Mississippi, and Louisiana) saw local home prices fall in May.
CoreLogic economists expect prices to increase 5.1 percent year-over-year in June and 0.8 percent month to month.
Chart of the Day: SALT in the GOP’s Wounds
The stark and growing divide between urban/suburban and rural districts was one big story in this year’s election results, with Democrats gaining seats in the House as a result of their success in suburban areas. The GOP tax law may have helped drive that trend, Yahoo Finance’s Brian Cheung notes.
The new tax law capped the amount of state and local tax deductions Americans can claim in their federal filings at $10,000. Congressional seats for nine of the top 25 districts where residents claim those SALT deductions were held by Republicans heading into Election Day. Six of the nine flipped to the Democrats in last week’s midterms.
Chart of the Day: Big Pharma's Big Profits
Ten companies, including nine pharmaceutical giants, accounted for half of the health care industry's $50 billion in worldwide profits in the third quarter of 2018, according to an analysis by Axios’s Bob Herman. Drug companies generated 23 percent of the industry’s $636 billion in revenue — and 63 percent of the total profits. “Americans spend a lot more money on hospital and physician care than prescription drugs, but pharmaceutical companies pocket a lot more than other parts of the industry,” Herman writes.
Chart of the Day: Infrastructure Spending Over 60 Years
Federal, state and local governments spent about $441 billion on infrastructure in 2017, with the money going toward highways, mass transit and rail, aviation, water transportation, water resources and water utilities. Measured as a percentage of GDP, total spending is a bit lower than it was 50 years ago. For more details, see this new report from the Congressional Budget Office.
Number of the Day: $3.3 Billion
The GOP tax cuts have provided a significant earnings boost for the big U.S. banks so far this year. Changes in the tax code “saved the nation’s six biggest banks $3.3 billion in the third quarter alone,” according to a Bloomberg report Thursday. The data is drawn from earnings reports from Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Wells Fargo.
Clarifying the Drop in Obamacare Premiums
We told you Thursday about the Trump administration’s announcement that average premiums for benchmark Obamacare plans will fall 1.5 percent next year, but analyst Charles Gaba says the story is a bit more complicated. According to Gaba’s calculations, average premiums for all individual health plans will rise next year by 3.1 percent.
The difference between the two figures is produced by two very different datasets. The Trump administration included only the second-lowest-cost Silver plans in 39 states in its analysis, while Gaba examined all individual plans sold in all 50 states.