Rising home prices – good sign, right?

Not necessarily.

Let’s walk through the logic.

= = = = =

First, home price indices show that home prices have stopped falling … and arguably are increasing.


= = = = =

And, relating home prices to equivalent property rental rates suggests that the bubble in home prices has been fully deflated and home prices should, at a minimum, creep upward.


= = = = =

But, a CNBC analysis offers a sobering offset.

Today’s housing recovery, much like the recent crash, is like no other.

While home prices fell nationally for the first time in history, they are recovering locally at drastically different paces.

Those that are seeing the biggest jumps are largely the markets that saw the deepest losses.

The huge influx of investors, mostly large hedge funds, have shrunk inventories and created bidding wars, hence the price gains.

They hedgers are turning those properties into rentals, and getting anywhere from 8 to 12 percent returns on their investments, thanks to still hot demand.

The risk of sales dropping as investors leave … and shift their sights and cash to more yield-worthy ground.

How Rising Home Prices May Actually Stall the Recovery

= = = = =

Flashback: Way back in Nov. 2008 we posted Big Idea: Rallying private capital to stabilize housing prices.

The big idea: Offer tax incentives to private capital to buy-up the excess supply of houses and rent them.

Imagine if the Feds had followed our advice 4 years ago …

* * * * *
Follow on Twitter @KenHoma                 >> Latest Posts

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s