The S&P Case-Shiller US National Home Price Index, after peaking at 184.62 in July of ’06 and falling 27.4% to 134.01 by February of 2012, has staged a remarkable comeback – reaching 185.23 in November ’16, a whopping 38.2% recovery from its trough. Denver, Seattle and Portland are the major metropolitan areas leading the recovery, increasing by 54%, 54%, and 53% respectively from the ’12 lows, as illustrated in the chart below.
Will the revival in home prices continue its forward march, and if so, what are its catalysts? The macro drivers have been historically low interest rates and a full recovery in the jobs market. A secondary reason for the turnaround has been the wholesale purchase of single family homes during the recessionary bottom by the large private equity houses, notably Blackstone. Another important reason has been the increase in per-capita disposable personal income. The orange line in the chart below represents disposable personal income growth, which is trending over three percent, a figure that appears to lift consumer confidence. The blue columns show annual growth in home prices. In November, housing prices rose at a yearly rate of 5.6%. According to the National Association of Realtors the median home price is $232,200. This means that average Americans have seen their home values increase by $12,000. That’s what I call a “Housing Revival.”