TY - JOUR T1 - Price Bubble Metrics for Single-family Housing JF - The Journal of Structured Finance DO - 10.3905/jsf.2019.1.071 SP - jsf.2019.1.071 AU - Frank E. Nothaft Y1 - 2019/01/11 UR - https://pm-research.com/content/early/2019/01/11/jsf.2019.1.071.abstract N2 - Home-price indexes for several metropolitan areas show real prices well above their pre-Great Recession level. Further, CoreLogic’s Market Conditions Indicator has identified more than one-third of metropolitan areas as possibly overvalued, the highest share in a rising price environment since 2003 and raising concerns of an upcoming national valuation bubble. This article presents four indicators to monitor overvaluation tendencies for metropolitan areas: price-to-income ratio, price-to-rent ratio, mortgage payment-to-rent ratio, and home flipping activity. The first three metrics measure overvaluation, while the fourth measures speculative fervor. Taken together, if multiple metrics indicate overvaluation, coupled with a surge in speculative investment, then there is a greater risk of a future price decline. These metrics indicate that there is little risk of a national price bubble in 2018, but parts of southern California, southern Florida, and the Puget Sound area do have heightened overvaluation risk. ER -