The Key to Home Prices?

By Marc Chandler, Global Head of Currency Strategy, Brown Brothers Harriman

This Great Graphic was posted on Sober Outlook, which in turn comes from JPMorgan, drawing on CoreLogic and BLS data. It tracks two times series, per capita income and house prices.

The compelling idea here is that over the long-run, the appreciation of house prices tracks per capita income.

Admittedly, there is great variation of house prices. It is difficult to conceive of a national market as something more than a summation of the local markets.

In any event, the question of the trend in house prices is transformed here into a question of the trend in per capita income. Per capita income has tended to grow around 5% a year in the US historically, but considerably slower since the end of the credit cycle. Next year, 2013, is likely to be another year of subdued growth in GDP, which at best will be a little more than population growth. This suggests little lift for house pries, generally speaking, next year.



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Marc Chandler

Marc Chandler

Marc Chandler has been covering the global capital markets in one fashion or another for nearly 25 years, working at economic consulting firms and global investment banks. Chandler attended North Central College for undergraduate. He holds masters degrees from Northern Illinois University and University of Pittsburgh in American History and International Political Economy. Currently Chandler teaches at New York University Center for Global Affairss, where he is an associate professor.

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  • Hans

    I would suspect, that there is little or no growth in household formations and as such, there can not be an extended run in real estate appreciation..

    Moreover, the American birthrate also lends itself for reduced demand in housing…

    The past twelve month price appreciation, was driven by professional investors and a dead cat bounce..Many foreclosed properties were removed from the market, due to price weakness and excessive inventory…