Bubble watch: Home-price anxiety builds in states with big gains

“Bubble Watch” digs into trends that may indicate economic and/or housing market troubles ahead.

Buzz: Google searches for the term “housing bubble” are more commonly done in Western states where home-price appreciation has exploded in the past year.

Source: My trusty spreadsheet analyzed Google Trends data — ranking 39 states for the intensity of “housing bubble” searches in the past 12 months — then compared those results to home-price changes from the Federal Housing Finance Agency — one-year gains through June and the previous four year’s annualized gains. Google did not have trend results for 12 states.

The Trend

When the 39 states were ranked by the relative frequency of “housing bubble” searches, the 13 states at the top of this anxiety yardstick — 11 west of the Mississippi — had bigger recent price gains than the 13 states at the bottom of this ranking.

The most-worried states had an average one-year price gain of 21.1% through June vs. 15.6% for the bottom 13. Interestingly, that gap between the gains was nowhere as wide when looking at the previous four years. The 13 most-worried states averaged 6.7% gains vs. 5.8% for the least-nervous states.

If searches do equal anxieties, these results suggest house value concerns can be tied to rapid increases in appreciation rates: Gains jumped 14.4 percentage points on average from the past year vs. 2016-2020 in the most-worried states. Compare that to a 9.9-point jump in the low-worry states.

The dissection

The pandemic era’s homebuying binge apparently motivated some house hunters to do some research on growing risks. Let’s look at the state-by-state extremes.

California had the sixth-largest “housing bubble” search share in the past 12 months. The statewide price gain of 20.2% over 12 months (No. 7 among the 39) was a huge leap from its 6% annual average for 2016-20, which ranked 18th in the previous four years. That translates to a gain gap of 14.2 points (also No. 7 of the 39).

Now consider the five places with the most skittishness, as measured by their relative share of “bubble” searches. Note some of the nation’s hottest markets, price-wise …

District of Columbia: Its No. 1 bubble search share came in a period with a one-year price gain of 15.7% (No. 28) vs. 4.3% average (No. 33) during the previous four years — a gap of 11.4 points (No. 19).

Idaho: No. 2 with one-year gain of 37.1% (highest of the 39) vs. 11.6% (also highest) previous four — a gap of 25.5 points (again, No. 1).

Washington: No. 3 with one-year gain of 21.9% (No. 5) vs. 9.2% (No. 2) previous four — a gap of 12.7 points (No. 11).

Oregon: No. 4 with one-year gain of 20.4% (No. 6) vs. 6.5% (No. 13) previous four — a gap of 13.8 points (No. 8).

Arizona: No. 5 with one-year gain of 23.9% (No. 3) vs. 8.1% (No. 5) previous four — a gap of 15.8 points (No. 5).

Next ponder, locations with less nervous googling — the five states with low bubble searches had more modest price gains …

Kansas: Smallest share of bubble searches came in a period with a one-year price gain of 16.3% (No. 23) vs. 5.2% (No. 27) previous four years — a gap of 11.1 points (No. 21).

Iowa: Second-smallest with one-year gain of 11.5% (No. 38) vs. 4.1% (No. 34) previous four — a gap of 7.4 points (No. 38).

Missouri: Third-smallest with one-year gain of 16.6% (No. 19) vs. 6.1% (No. 17) previous four — a gap of 10.5 points (No. 24).

Louisiana: Fourth-smallest with one-year gain of 9.6% (lowest of the 39) vs. 3.1% (No. 38) previous four — a gap of 6.5 points (lowest of the 39).

Pennsylvania: Five-smallest with one-year price gain of 16.4% (No. 22) vs. 4.9% (No. 30) previous four — a gap of 11.6 points (No. 16).

Another view

Across the U.S., fears have cooled. Searching for “housing bubble” in May — as homebuying’s intensity ballooned — hit a level not seen since Sept. 2016. Since then, nervousness has eased with searches back to a just-above-average level in early September.

How bubbly?

On a scale of zero bubbles (no bubble here) to five bubbles (five-alarm warning) … THREE BUBBLES!

With all the industry’s housing hype out there, my view on consumer concerns has changed. If homeowners and house hunters are nervous, I still see such emotions as a warning sign, plus there’s a twist — apprehension becomes an opportunity for buyer skittishness to temper the cheerleading and perhaps cool a badly overheated market.

Jonathan Lansner is business columnist for the Southern California News Group. He can be reached at jlansner@scng.com

Source: Orange County Register