Analyzing trend data from First American CoreLogic and the Federal Housing Finance Administration, PMI Mortgage Insurance reports in its latest Housing Market Mortgage Review “that the bulk of the home price declines are behind us.” It continues:
“. . . Both also suggest that house prices have still not reached their long-term trend levels.”
As with other goods and services, house prices depend on demand and supply. Over a long period of time, however, the growth rate in home prices should conform to income growth – otherwise houses would become either increasingly unaffordable or more affordable, PMI observes, adding that over long periods, home price growth and income growth tend to be similar.
The data are shown in the charts below. The first one shows CoreLogic’s Home Price Index (HPI), while the second graphs actual levels of the HPI through July 2009, as well as the long-term trend based on the 1983-2001 house price data. And the third charts the same relationships for the FHFA purchase-only HPI.
This stuff ain’t easily digestible, but it’s good for you. Like carrots and leafy vegetables. The explanation that follows the charts is worth reading and can well make clear what you’re seeing.