Steven Russolillo reported in Tuesday’s Wall Street Journal that, “By one measure, the housing market’s lost decade is finally a thing of the past. In real terms, it is far from over.
“U.S. home values in September topped their previous peak from a decade ago, according to the S&P/Case-Shiller 20-City Home Price Index. New data expected Tuesday should show more of the same in October. Prices have grown at about a 5% annual clip for much of the past two years.
“On paper, home-price increases may have come full circle following the worst housing bust since the Great Depression. But these nominal price gains don’t take into account the consumer price increases that inflate home values over time. In real terms, the index still is about 16% below the 2006 high. A number of factors could make further price appreciation and possibly even a new inflation-adjusted high that much tougher to come by in the new year.”
The Journal article added that, “The market is flashing warning signs. The homeownership rate still hovers near a five-decade low and it is tough for less-affluent buyers to obtain mortgages. Meanwhile, mortgage rates have risen substantially since Donald Trump’s election victory, which will affect affordability.
“Even without that, historical trends suggest that housing prices aren’t likely to keep rising at their current pace. For instance, since prices bottomed in 2012, they have risen in real terms at more than 5% a year, according to data courtesy of Yale economist Robert Shiller. That is great news for current homeowners but bad for anyone looking to buy, particularly first-time buyers. The appreciation far exceeds income growth over that time frame.”
