Do Past Cycles Predict the Future of Home Prices

Abstract

Volatility in U.S. home price growth during the pandemic cycle (early 2020-present) is historically atypical. Although unprecedented volatility was present during the 2004-2014 housing boom/bust cycle that encompassed the global financial crisis (GFC boom/bust cycle), these two cycles are fundamentally quite different, as are the lessons they hold for the future. Most significantly, the pre-existing economic and credit conditions differed, as did the fiscal and monetary policy responses. Consequently, the dynamic between single-family home price changes and housing affordability levels, inventory of homes for sale, and mortgage credit performance of the recent past may not predict the future.

Author:

Christian Malagon