US Home Prices Are Rolling Over (in one Chart)

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The numerous outfits that attempt to measure home price levels and movements in the US all come up with different numbers, and often frustratingly so, in part because they measure different things. Some measure actual cities, others measure the often multi-county area of the entire metroplex. So the absolute price levels differ, and timing may differ as well, but the movements are roughly the same.

The chart by the Atlanta Fed overlays three of the major real estate data series – the Federal Housing Finance Agency’s House Price Index, the CoreLogic National House Price Index, and the S&P/Case Shiller Home Price Index (20-city). And one thing is now abundantly clear:

Year over year, home-price increases are fading from crazy double digit gains last year toward….?

US-Home-Prices-Atlanta-Fed_2002-2014

Note the great housing bubble that the Greenspan Fed instigated with its cheap-money policies that then led to the financial crisis. It was followed by a hangover.

And the show repeats itself:

The ephemeral bump in home prices in 2010 and 2011 was a result of federal and state stimulus money (via tax credits) for home buyers. It was followed by a hangover.

The hefty home price increases of 2012 and 2013 were nourished by investors, including large Wall Street firms with access to nearly free money that QE and ZIRP made available to them. They plowed billions every month into the buy-to-rent scheme. When prices soared past where it made sense for them, they pulled back. And now the hangover has set in.

There is no instance in recent history when home prices soared like this beyond the reach of actual home buyers, then landed softly on a plateau to somehow let incomes catch up with them. Despite the well-honed assurances by the industry, there is no plateau when home prices are inflated by outside forces. When these forces peter out, the hangover sets in.

How long the current hangover will last and how far prices have to drop before demand re-materializes even as interest rates are likely to be nudged up remains a guessing game. So far, prices are still up on a national basis year over year. But in some areas, price changes have started to go negative on a monthly basis. And the trend has been relentless.

Someday perhaps, governments and central banks will figure out that every stimulus and money-printing binge is followed by a hangover. And when that hangover gets painful, suddenly there are new screams for more stimulus and another money-printing binge, regardless of what will come as a result of it, or after it fades.

And this chart shows how screwed up this housing market really is. Read… Last Time this Happened, the Housing Market Crashed

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  5 comments for “US Home Prices Are Rolling Over (in one Chart)

  1. Vespa P200E
    Oct 3, 2014 at 5:31 am

    Last round of housing bubble 6 yrs ago were proliferation of no down, interest only, negative amortization and liar loans given to anyone with a pulse. This time we have amateur flippers, all cash buyer investors and foreign hot money inflating the housing bubble again.

    Dejavu 2008 when housing bubble deflated with demise of Bear Stearns and Lehman leading to stock market correction and ushering in the global slowdown?

    Gee sounds like we are where we were 6 yrs ago plus whip of Ebola, ISIS terrorists running amok in greater Syria/Iraq, cold war drums in Ukraine, stratospheric sovereign debts (ahem USA) and not to mention rounds of circle jerk US/EU/Japan/China QE to oblivion? Yeah don’t think it will end well,,,

    As the saying goes – we learn history so as not to repeat it.

    • Oct 3, 2014 at 9:13 am

      Hey Vespa,

      I stand corrected. You wrote: “As the saying goes – we learn history so as not to repeat it.”

      I always thought – based on my own observation – that the saying went like this: “We learn history so that we can repeat it.”

      • DG
        Oct 4, 2014 at 8:47 am

        Most suggest the Fed, the political class, and Wall Street banks all suffer collective amnesia and forgotten their history.

        To the contrary, their memories are like a steel trap and they have a near perfect recall of history. They have learned from history that they can rig markets and blow speculative bubbles to the sky and in so doing they will become fabulously wealthy beyond their wildest dreams. They have learned from history that the laws of cause n’ effect no longer apply and reckless risk taking has no negative consequence to them. They have learned from history that when markets crash and economies blow up taxpayers will foot the bill, nobody goes to jail, and they will get bailed out. They have learned from history that repeating history is highly rewarding. Pumping and blowing bubbles with policy errors and reckless speculation results in plumb consulting gigs in DC or on Wall Street, early retirement to yachts in the south of France, or absurd fees on the speaking tour.

        The elites have learned their history well … it is the rest us us who appear to have failed to learn anything.

        • Mark
          Oct 7, 2014 at 5:34 am

          We’ll put. Couldn’t agree more.

  2. Muggy
    Oct 4, 2014 at 8:51 am

    Looks like housing is cratering.

Comments are closed.