Market Trends Show 18 Months of Stability in Real Home Prices
One of the blogs we follow is that of economist, Scott Grannis. In a recent blog, he showed the following Case Shiller graph:
The chart shows inflation-adjusted home prices in the top 20 metropolitan markets being essentially flat for the past 18 months. He argues that home prices have fallen 35% from their peak in early 2006.
He also notes that 30 year fixed-rate mortgage rates have declined from 6% in early 2006 to 4.5% currently. That equates to an effective decline in the monthly cost of purchasing a home of about 50%. During the same time period, real personal incomes are up over 6% since 2005.
He uses this next graph, which takes the inflation-adjusted index all the way back to 1890 to show that current prices are not out of line with historical trends. His point is that while a further decline in home prices can’t be ruled out, he thinks it unlikely. The article in greater detail is worth a read.
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