Don't Get Your Hopes Up About Home Prices

Our long national nightmare is over. After 10 years, the Case-Shiller home price index is just a smidge above its previous peak, from July 2006. That was the longest sustained dip in national home prices in decades, and its effects on American citizens, and the economy, have been both deep and widespread.1480522554721

Of course, the Case-Shiller index uses nominal prices, so when you adjust for inflation, we’re still below the peak. Still, it’s something of a mystery why prices have recovered as far as they have. They’ve substantially outpaced income growth since the market’s bottom in 2012. Home prices aren’t an asset class that can indefinitely grow wildly out of proportion to incomes; they’re too large a component of household spending, too big a part of the economy to keep growing at a rapid clip even when other things aren’t.