Thanks OP, glad to see Grantham and GMO getting some attention here. They are as good as it gets when it comes to identifying and analyzing bubbles. FYI – you have to register to access their stuff but it’s free and well worth the small effort.
My own version of the graph looks a little different as, unlike US-wide prices, SD prices have been a lot more volatile.
So the US-wide overvaluation is more unusual than the SD level of valuation, for what that’s worth.
All due respect to Grantham (who is literally my investing hero — btw I got to meet him once, it was awesome </fanboy raving>) — I don’t see it so much as an echo bubble, as just a response to low rates. Rates are extremely low and even at these price levels, buying can pencil out. So it’s more like high housing prices are a rational response to (irrationally?) high bond prices.
But that’s just my feeling on it. When in doubt, listen to Grantham.
(Fortunately, the question of whether the “bubble” label fits or not is not all that important –and I’m sure my man JG would agree with that. The important issue is that housing is expensive, whatever the reason may be, and prospective risk/returns should be evaluated accordingly).
