Housing Market Rocket Ride to Continue? M2 Money Printer Brrring
FMAC HPI Housing price index is interesting to look at versus the money supply.
Both are always increasing and fairly predictable since 2012.
The HPI tends to follow this ebb and flow moving up all the time, until this year where we haven't seen it's typical plateau.
When you check the money supply trend, M2, we can see that if we follow the trend going back to like 2012, that since January 2020 we should have seen only around a 3% max increase in the money supply, and maybe actually flat if we were at the bottom channel.
Instead we've seen 18% more increase than the 3% we anticipated, for a total of around 21% increase where we would have expected a maximum of only 3%.
Now looking at the HPI we can see that very typically it ebbs and flows in these 4-6% up cycles, lets call them 5%.
This year we haven't see that plateau and have gone straight up about 10%, only double.
The question is how correlated are these two, are we set to see another 35% straight increase in the HPI over the coming months and years???
21% increase / 3% anticipated increase in M2 = 7 times anticipated
10% increase / 5% anticipated increase in HPI = 2 times anticipated
7 / 2 = 3.5 times HPI lag versus the money supply
Will we see that 3.5 times lag play out as another 30% straight increase in the HPI?
Many other factors such as supply and demand play factors in the housing market, but this is an interesting one to watch.
Both are always increasing and fairly predictable since 2012.
The HPI tends to follow this ebb and flow moving up all the time, until this year where we haven't seen it's typical plateau.
When you check the money supply trend, M2, we can see that if we follow the trend going back to like 2012, that since January 2020 we should have seen only around a 3% max increase in the money supply, and maybe actually flat if we were at the bottom channel.
Instead we've seen 18% more increase than the 3% we anticipated, for a total of around 21% increase where we would have expected a maximum of only 3%.
Now looking at the HPI we can see that very typically it ebbs and flows in these 4-6% up cycles, lets call them 5%.
This year we haven't see that plateau and have gone straight up about 10%, only double.
The question is how correlated are these two, are we set to see another 35% straight increase in the HPI over the coming months and years???
21% increase / 3% anticipated increase in M2 = 7 times anticipated
10% increase / 5% anticipated increase in HPI = 2 times anticipated
7 / 2 = 3.5 times HPI lag versus the money supply
Will we see that 3.5 times lag play out as another 30% straight increase in the HPI?
Many other factors such as supply and demand play factors in the housing market, but this is an interesting one to watch.