Housing Statistics: Home Prices Up 5.9 Percent In 2012

Solid appreciation, that one. 5.9 percent in one year - home prices in the US have shown a solid improvement after years of disappointment. This is the largest annual gain since 2006 (Source)

Here, we summarize our confusion regarding home prices:

1. If prices go up due to increase in demand (availaility of housing loans), we shout “it’s a bubble”
2. If prices go down due to increase in supply (inability to pay, foreclosures etc), we shout “it’s a crash”
3. If prices go up due to decrease in supply (low housing starts) we shout “housing has stagnated”
4. If prices go down due to decrease in demand (people thinking that the prices are high), we shout “banks are not lending, this is not the true picture”

If supply and demand cannot explain housing prices, we are forced to ask:
“What forces do we think should truly drive housing prices?”