Note: For an explanation of OER, see this PDF commentary from the Bureau of Labor Statistics.
HPI and OER moved in close parallel from the 1991 inception date of the former until early 1999, when the two parted company and HPI began accelerating into the housing bubble. HPI then fell 20.7% over the next 48 months to its March 2007 trough. Confirmation of the “bubble” designation for house prices is the 40.2% spread between HPI and OER in January 2007.
Is another housing bubble forming? The current spread is 17.6%.
This article is brought to you courtesy of Jill Mislinski from Advisor Perspectives.