5 Charts That Prove Housing Prices Aren’t Coming Down Anytime Soon
Download MP3In this episode, we break down five key charts that explain why home prices are unlikely to fall and may continue rising. These insights go beyond surface-level assumptions and explore the real forces at play in today's housing market.
📌 Key Points Covered:
- Home prices are on a consistent upward trajectory and are likely to stay that way.
- The idea that homes are becoming unaffordable doesn’t mean values are unsustainable.
- Even during the 2005–2007 housing crash, most homeowners kept their homes—the real issue was risky loan structures.
- Fixed-rate mortgages offer long-term affordability, unlike adjustable or interest-only loans that triggered past crashes.
📊 Chart 1: Price-to-Earnings Ratio (P/E) of Stocks
- P/E ratios shifted permanently above 20 since 2016, showing market willingness to value assets higher.
- Increased transparency and retail investor activity changed how assets like stocks are valued.
- Real estate may follow similar trends—value isn’t always tied strictly to underlying income or material costs.
📉 Chart 2: Historical Mortgage Rates
- Contrary to popular belief, higher mortgage rates won’t crash the market—they’ll reduce inventory.
- Most homeowners have locked in low interest rates (2–3%) over the past decade.
- Higher current rates (5–7%) discourage people from selling, reducing resale inventory.
- This supply lockup supports high home prices despite rising interest rates.
🪵 Chart 3: Lumber Prices
- Lumber prices influence the cost of new homes, which in turn affects resale home prices.
- Historically, lumber traded in the $200–$500 range. Since 2020, the new range is $500–$1500.
- Industry changes, labor costs, and inflation support this higher price band.
- Builders now factor in high lumber costs into pricing, indirectly raising home values across the board.
🏠 Chart 4: Median Home Prices Over Time
- Despite short-term spikes, long-term home price trends show a steady, linear rise.
- The 2008 housing crash was an anomaly caused by financial system failures—not buyer demand.
- If plotted without the crash dip, the appreciation trend from 1991 to now is smooth and consistent.
- Recent “spikes” are simply a market correction catching up to historical growth patterns.
🏡 Final Thoughts
- Multiple indicators—mortgage behavior, materials costs, investor psychology, and historical trends—show that today’s home prices are not inflated in the way past bubbles were.
- These charts collectively support the case for a “new normal” in real estate valuation.
- Homeowners with low interest rates are unlikely to sell, which will keep inventory low and prices high.
