Gold, Housing And Credit Impulses (US House Price Growth Slowing As US Residential Credit Impulse Slows)

As Hurricane Dorian (cat 4) approaches the eastern Florida coast and Hong Kong protestors clash with police, I thought I would discuss something cheerful .. like rising home prices globally and in the US. Cheerful for current homeowners that is, not current renters.

According to the International Monetary Fund (IMF), the global REAL house price index (white line) has recovered from the global housing bubble burst and is now at an all-time  high. US NOMINAL home prices have recovered from the housing bubble and are now higher than at the peak of the US housing bubble (2005).

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If we look at real estate with respect to gold, US housing was the most expensive in the early 2000s. And the ounces of gold needed to buy an average US home remains relatively low (that is, back to 1984 ratios).

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Of course, the flow of credit can help explain housing prices. In the US, both Commercial and Industrial loans (C&I) and loans and leases (Lo&Le) are significantly lower than during the late 2000s. Yet, US home prices continue to rise.

Screen Shot 2019-08-31 at 9.16.40 AM

If we put home price growth YoY (green line) on the chart, you can see home price growth slowing with the lower than average credit impulse (red line).

Screen Shot 2019-08-31 at 9.31.44 AM

At the global level, credit impulses are down but may be showing signs of increasing.

credit impulse

 

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