Over a long period, home prices tend to follow growth in per capita income. After bouncing off the recent lows, home prices have once again reverted to their long-run growth trend.
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| Source: JPMorgan |
Historically, incomes (total incomes of everyone over 15 years of age divided by the population size) have grown at roughly 5% per annum (although this growth has been more modes recently). In the next few years house price appreciation (HPA) will likely stay in that range as well (or lower). In fact the CME Case-Shiller futures are forecasting the average HPA to be just above 3% per year in the next three years. And unless incomes in the US somehow experience a dramatic upturn, HPA should stay subdued.
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| Source: JPMorgan |
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