AP Writes: US home prices rise 12.4 pct., most in 7½ years

WASHINGTON (AP) — U.S. home prices rose 12.4 percent in July compared with a year ago, the most since February 2006. An increase in sales on a limited supply of available homes drove the gains.

The Standard &Poor’s/Case-Shiller 20-city home price index reported Tuesday improved from June, when it rose 12.1 percent from a year ago. And all 20 cities posted gains in July from the previous month and compared with a year ago.

Stan Humphries, chief economist for real estate data provider Zillow, said home price should continue to rise but at a slower pace. Mortgage rates have increased more than a full percentage point since May. And more homes are being built. That should ease supply constraints that have inflated prices in some markets.

“This ongoing moderation is good for the market overall,” Humphries said.

Home prices soared 27.5 percent in Las Vegas from a year earlier, the largest gain. San Francisco’s 24.8 percent jump was the second largest and the biggest yearly return for that city since March 2001.

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We have already discussed the following multiple times, but I would like to concentrate your attention on something.

U.S. home prices rose 12.4% percent in July compared with a year ago, the most since February 2006.
Home prices soared 27.5% in Las Vegas and 24.8% in San Francisco from a year earlier.

While most people might see this as a positive, this is way out of line from any reasonable financial metric. If there were fundamental reasons for such an increase…..things such as housing shortage, rising incomes, tight job market, inflation, falling interest rates, etc….. I would be the first to tell you that real estate market has started a bull run. However, the reality is the exact opposite. There is no housing shortage, median incomes are falling, unemployment is high and interest rates are up 100% over the last 12 months.

So, what gives?

Basically, if this doesn’t scream “Housing Bubble” is back in full force to you, nothing else will. To begin with, real estate should never be viewed as an investment, unless that is your occupation. It should be a viewed as a place to live. Second, the numbers above are nothing more than a secondary speculation bubble in real estate that will soon pop as well. There is no doubt about it. It is just a matter of time.

I have already indicated that you should watch Las Vegas Real Estate if you want to time it perfectly. Otherwise, be very careful here. The real estate market will blow up sooner or later and the next stage of the decline will be much deeper. No doubt about it.

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