The Strategist

Nine American cities under the threat of a real estate bubble

03/01/2018 - 13:51

According to data of S&P CoreLogic Case-Shiller National Home Price Index for December, property prices in the US rose by 6.3%. This index has already exceeded the maximum value that was observed in July 2006, when the situation first became dangerous, and eventually resulted in the "bubble" in the real estate market, and in a major crisis.

Guy Kilroy
Guy Kilroy
Real estate prices in selected US cities, in addition to being influenced by national and global factors, such as the national monetary policy and the activities of offshore investors, are influenced by local factors. In particular, some US cities show signs of inflation of the "bubble" in the real estate market.

The Case-Shiller Index is based on average data for the past three months. Among other factors, the index takes into account paired deals, for example, a house that was sold in 2008 and then sold again in December 2017. Below are nine US cities, in which experts see signs of a bubble in the real estate market.


The Case-Shiller index, calculated for Boston, has declined. This is the third consecutive decline after 22 months of growth. Despite the decline, prices are still 5.5% higher than in the same period a year earlier. Nevertheless, experts note that such decreases may be associated with seasonal fluctuations. Meanwhile, there were no seasonal price fluctuations during the price increase in 2015 and 2016.


The Seattle index rose 0.6% compared to the previous month and reached a new record. However, it declined for two months in a row before that, for the first time since the end of 2014. Now the index is 12.7% compared to the same period last year and 21% higher than in July 2007.


The Case-Shiller index for this city increased by 0.5% compared to the previous month. This month has become the 26th straight, during which growth occurs. Compared to the same period last year, the index is higher by 7.4% and by 45% compared with the peak in July 2006.


The Dallas index has been growing for the 47th consecutive month. Compared to the previous year, it is 6.9% higher, and is 43% higher compared to the peak of July 2007.


The December Atlanta index remained unchanged for several months in a row. However, compared to the same period last year, it is 5.4% higher and 3% higher than the peak in July 2007. It should be noted that it has significantly increased by 70% since February 2012.


The Portland Index remains unchanged for the past five months. This is consistent with the usual seasonal fluctuations at this time of year. However, at the moment the index is 6.8% higher compared to the same period last year, and it has grown by 73% since 2012.

San Francisco

The Case-Shiller index for San Francisco and neighboring cities, including Alameda, Contra Costa, San Mateo and others, rose 0.5% in December, 1.4% in November, and in October 1.2%. Compared to the same period last year, the index grew by 9.2%, and compared to 2000 - by 153%.

Los Angeles

Compared to the same period a year earlier, the Los Angeles index rose by 7.5%. The last bubble in this market was characterized by high growth rates - so, the index grew by 174% from January 2000 to July 2006.

New York

In December, the index rose slightly, but compared to the same period a year earlier - by 3.6%. If we recall how the previous "bubble" was formed in this market, then from 2000 to February 2006 the index grew by 131%.