In the last few weeks, we’ve seen a lot of news stories about home prices losing their upward momentum in some U.S. cities. The word “momentum” is in many of these articles because prices aren’t falling in most of those cities, they just aren’t increasing as fast anymore. People are wondering if these home price changes are random noise or the beginning of fundamental changes in home prices in those cities. Let’s review what people are saying about home price trends in the United States.
Internationally, home prices are actually falling in Toronto, Vancouver, Sydney, and Melbourne. None of those four cities saw much of a real estate bust during the Great Recession and their home prices took off again during the economic recovery that followed. Their home prices ended up being way out of line and seem to have topped out and started to fall.
Single-family home prices are lower now than a year ago in those cities even though their national economies are booming. The big worry is if prices are weakening now when their economies are so strong, what happens to home prices if a recession hits in the next two or three years? Without support from growing national economies could home prices fall significantly and turn a normal recession into another mega-recession?
In the United States, home prices are still increasing but after our unbelievable real estate bust…