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Feb 26 2019

Cyclical Underpinnings for Home Prices Giving Way

U.S. home prices growth has been slowing precipitously – completely in line with ECRI’s earlier analysis. We’re now at the point where, as home price inflation slackens further, there is a real risk that prices will actually fall. This concern is underscored by recent moves in ECRI’s U.S. Leading Home Price Index (USLHPI), which was prescient in spotting this downturn in home price inflation well before conventional methods (the LHPI will be updated this week).

When ECRI last showed the USLHPI publicly in October, its downturn was already quite dramatic, and since then it has fallen off a cliff. If home prices do fall nationally – joining recent drops on the west coast and a handful of other states –the ramifications for the economy at large could be serious.

ECRI monitors numerous cycles in the U.S. economy, including those in overall economic growth and inflation, as well as in specific sectors, such as residential real estate. To do this, we employ an array of leading indexes that has a long track record of success — for example, USLHPI growth nailed the 2006 housing bust in real-time, providing an early signal of the cyclical contagion that would culminate in the Great Recession.

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