Home Prices Up, Nobody Knows What That Means

Home prices in the U.S. have seen unexpectedly high gains during the first quarter of 2013 and there was much talk this morning whether or not this is the beginning of another bubble, or if it’s simply a “a strong spot in the economic recovery”.

All 20 metropolitan areas tracked by the S&P/Case-Shiller Home Price Index has shown year-over-year growth. What can we draw from that? After what we went through during our last housing crisis—which wasn’t so long ago—nobody can say for sure. As Matthew Yglesias puts it:

Financial markets are simply very hard to predict. Relative to rents, houses still look cheap in most markets, and that situation seems unlikely to persist. But whether that means rents will fall or housing prices will rise is very difficult to know.

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