This Key Metric Rules Out A Repeat of 2007 Housing Crash

  • Analysts are looking for cracks in the housing market data as the longest economic recovery in U.S. history continues.
  • But most of the blips in the data are too short term, and not correlated meaningfully with other economic indicators.
  • Two key data relationships from the demand and supply side show a very healthy recovery that’s likely to last.

Since the Great Recession we’ve seen the longest-running economic recovery in U.S. history. It has left many nervously anticipating a stock market bust or housing crash. From 1854 to 2009, there were 33 business cycles with the upswing lasting 3.2 years on average followed by a 1.5 year correction.

So after a decade of record-setting growth across the board, some investors are apprehensive that the end must be near. Fallout from the housing bubble was so catastrophic, analysts are hyper-vigilant for signs of another crash.

But other than minor blips and bumps that have traumatized forecasters spooked, the pertinent data reveal strong fundamentals and quite sober residential real estate prices. It appears we’ve learned our lesson.

Housing Crash Alarmism

National Association of Realtors economist Lawrence Yun sounded the housing bubble alarm earlier this month:

Incremental price increases are to be expected, but the housing market has been seeing reacceleration in home prices as more buyers want to take on lower interest rates in the midst of insufficient supply. Unfortunately, income and wages are not rising as fast and will make it difficult to buy once rates rise.

But this is only technically true according to a slice of the data that’s so narrowly bounded it obfuscates the big picture.

The growth in housing prices dramatically outpaced growth in real median income during the housing bubble that precipitated the Great Recession. Not so during the real estate recovery of recent years.

In Q1 2007 the median sales price of houses sold in the United States (MSPUS) peaked at $257,400. That represented a 38%…

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