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No Housing Bubble to Pop


A leading index of housing prices continues to rise steadily, suggesting no decline in U.S. housing prices ahead.

The Economic Cycle Research Institute's leading home price index, designed to anticipate cyclical swings in home prices, rose to 121.9 in September from 120.0 in August, and up from 115.0 in September 2001.

"The LHPI accurately anticipated every past downswing in home prices," ECRI said. "It is particularly notable that the LHPI correctly predicted the unusual resilience of home prices during the 2001 recession, unlike many observers who waited in vain for home prices to fall."

ECRI said the current upturn in home prices has not been as sharp as the upswings in the 1970s and 1980s, even inflation-adjusted.

"Thus, contrary to widespread concerns, there is no 'bubble' to pop, and even if home prices are to come down nationally, that is not likely to happen until after the LHPI starts to decline," ECRI said.