Home Price Trends and Worries

Market Trends - 29/09/2015

Many analysts have continually called the top of the home price bubble in this post-housing crisis world, and this month is no different. For the fourth time in a row, the S&P Case Schiller Home Price Index has missed estimates forecast by economists, displaying mixed data that has run perpendicular to economist statements. The critical importance of this report cannot be overstated, and signs like drastically falling existing home sales figures, though offset somewhat by decent new homes sales is worrisome. Recent numbers point retail traders who rely on reports like these as an economic barometer towards the trend of increasing rentals and decreasing home ownership in the US, with the latter statistic sitting near its lowest level since 1967. Patterns in the market like these signal to many the real problem of a shrinking middle class and a labor sector transitioning from full to part time.


The Home Schiller index could play a big role in the eventual decision to raise rates by the Federal Reserve. However, the disappointing numbers and forces behind them are not directly caused by deflation, as most home owners are likely finding that the growing costs of home ownership are somewhat inflationary. This, among factors like an increase in corporate landlords, has spurred the biggest transition to rental from ownership in decades as costs rise for both groups. Reports on home prices increasing by 5.00% may not be a lasting trend, as many soon-to-be retirees seek to sell their homes to a younger generation not able to afford them and already accustomed to renting. Crumbling economic conditions may soon force home prices into a negative trend that will deflate the bubble, as demographic and economic shifts take control of the marketplace.

 

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