Reality for Real Estate

Last year I wrote all good things come to an end, including the easy money from a decade-long rally in housing prices. The chart below shows how peaks (green circles) in home sales activity (blue line) historically lead prices (red line). I noted the divergence in June 2021 (green arrows) was untenable, and I expected a reversion one way or another.

It seems that time is upon us. Home prices teeter on the precipice and a growing chorus of people warn of a housing bust that could be worse than what happened in the great financial crisis (“GFC”). With values stretched and interest rates rising, a near-term pull-back in housing is a near certainty. However, there are several reasons why 2022 will unlikely be a repeat of 2006.

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