Home prices in the U.S. have topped 2007 bubble-era peak for first time. U.S. home prices rose 0.5% in October according to the Federal Housing Finance Agency (FHFA) monthly House Price Index. The FHFA House Price Index is calculated using home sales price information from mortgages sold to, or guaranteed by, Fannie Mae and Freddie Mac.
October’s reading topped the March 2007 peak for prices for the first time. The index value was 227.50, compared to 226.86 in 2007. The graph below shows the monthly House Price Index as it has changed from January 1991 to present day.
Maybe the Interest Rate Increase is a Good Thing
This certainly was a contributing factor to the Fed’s decision to increase interest rates earlier this month. Raising interest rates is a way to control inflation. Check out this Investopedia article – Inflation: Inflation And Interest Rates – to learn more about the relationship between interest rates and inflation.
Contrary to popular belief, excessive economic growth, which is a result of extremely low interest rates – can in fact be very detrimental. An economy that is growing too fast can experience hyperinflation, which could result in another crash.