When Are Home Prices Going To Come Down?
Ever since values shot up during COVID, I get one question more than any other: when's the crash coming?
I get it. Last time prices ran up like this, they fell off a cliff. So it's got to happen again, right?
We're six years into this run now. And just this weekend a friend asked me the same thing. So here's what I told him.
First, the stuff nobody can predict
Let's set the outliers aside for a second.
This country has gotten used to "rare" events that aren't rare anymore. But we still can't call them. We don't know what they'll be, when they'll hit, or which way they'll shove the market.
Nobody — and I mean nobody — saw a global pandemic coming that would push a mountain of money into the system. That's not a number you plan around. It's the exact oddity that makes this last spike so strange.
So why is this cycle different?
The data folks love their charts. I'll admit I poke around the real estate ones now and then — they're broad and usually behind, but they're an honest record of what already happened.
Today I want to look at a different one: the money supply. The M2 chart.
Put it next to the home value chart over the same stretch and here's what jumps out.
2003 to 2008: prices climbed, but the money supply barely moved. That run-up was credit loosening up, plain and simple. It couldn't hold. And it didn't.
The COVID run-up: different animal. Rock-bottom interest rates drove demand through the roof — and this time the money supply climbed right alongside it. Nearly step for step. Both peaked in April of 2022. Both eased off after. Both are still trending up.
That's not nothing. It makes me wonder if that's the reason this run has held for six years and counting.
So when do they come down?
What goes up must come down. I buy that.
The trick has never been whether. It's when. And timing the market is a fool's errand — I've watched plenty of smart people try and miss.
But I bring the money supply into it for a reason. If that's what's holding values up, then the real question isn't "when do prices fall." It's "what brings the money supply down first?"
Because I'd bet those two are standing awful close together.
Hold on — foreclosures are climbing?
They are. And that changes the conversation.
More on that next time.
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