Chart Mania: Global Home Prices

From Bespoke Investment Group:

Global Home Price Values

On Friday we sent out The Bespoke Report to our subscribers.  The below excerpt is a discussion on global home prices that we included in that report.

Housing has been in vogue recently.  The market is full of speculation that in the US housing will underperform for the foreseeable future.  While we don't agree in the long term, there have even been mentions of housing weakness cropping up in Fed discussions, like this comment from Fed Chair Janet Yellen's economic outlook testimony to the Joint Economic Committee in May:

One cautionary note, though, is that readings on housing activity—a sector that has been recovering since 2011—have remained disappointing so far this year and will bear watching ...
... the recent flattening out in housing activity could prove more protracted than currently expected rather than resuming its earlier pace of recovery ...

The UK market, it turns out, has the opposite problem.  In the morning commentary we send out with The Morning Lineup and our comments in The Closer, we've repeatedly noted that Bank of England chief Mark Carney is focused on risks in the UK housing market, centered on London property values.  From the Bank of England's most recent annual report:

We are fully aware that the environment of low and predictable interest rates necessary to nurture the recovery could encourage excessive risk taking in financial markets and by households. In November, the Bank’s Financial Policy Committee announced initiatives to reduce the stimulus being provided by the authorities to the housing market. We will not hesitate to take further proportionate and graduated action as warranted. That will allow monetary policy to remain focused on providing the stimulus the economy needs for as long as it is needed to secure a strong, sustained recovery.

But the UK and the United State are actually the least interesting housing markets out there! Below is a chart of 11 developed-market home price indices indexed to 100 as of Q1 2000.  The data is taken from the Dallas Federal Reserve's analysis of global home prices, and uses the real prices of homes: prices adjusted for inflation using the PCE deflator for each country in question.

The above chart is a bit hard to read, so we've parsed it out into several charts below.

The US has definitely begun to recover from its grinding downtrend in home prices, while the UK appears to be relatively stable since the end of the global recession in 2009.

...MUCH MORE