One Chart That Shows Why The House Price Comeback Is A HUGE DEAL

Earlier we wrote about the new housing debate: Will the recovery provide a meaningful boost to the economy?

One side says that the increase in home values is a big deal.

The other side says construction is just too small of a share of the economy

To answer that, we’d just like to point to this chart.

Red line = Case-Shiller Home Price Index
Blue line = housing starts
Green line = stock market
Orange line = year-over-year change in GDP

image

The sharp collapse in the blue line starting at the end of 2005 was clearly not a positive for GDP, though it continued to grow for a while afterwards.

It was the sharp collapse in the red line starting in 2007 that destroyed everything.

And if prices start to come back, that’s a big deal.

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