Conversely, a crash in house prices does not destroy any real wealth (the houses still stand).

But, with real (inflation adjusted) house prices still 40 below the previous peak, a strong recovery for real estate (and the closely related construction industry) seems unlikely.

The prices of traded mortgage backed securities have followed house prices down.

The real danger arises when everyone is convinced that investing in real estate is the best way to secure one s own future because house prices can only go up.

Will Rising Interest Rates Torpedo Stock and House Prices?

Moreover, real estate prices might fall dramatically, in which case many households may find the value of their mortgage exceeding the value of their house.

Homeowners, backed by rising house prices, are piling up debt.

The higher prices of food and energy depress real incomes further.

High prices send a real message about scarcity in a globalizing world.

We cannot be sure about how much further house prices will fall.

Until house prices stabilize, these securities cannot be valued with any confidence.

If inflation rises, nominal house prices don t need to fall as much.

All of this may have caused a temporary improvement in house prices.

Real estate rental yields and stock market payouts are low, and real estate and stock prices may well fall as much as or more than bond prices if interest rates spike.

The rise in house prices has begun to stabilize, and the impact of the rise in commodity prices is tapering off.

Now, by contrast, food and gasoline prices are rising, owing to emerging markets ongoing boom, while house prices continue to plummet.

The most reliable index of comparable house prices has continued to decline month after month, and prices are now about 7 lower in real terms than a year ago, implying a 1 trillion loss of household wealth. With roughly 25 of all homeowners with mortgages owing more than their homes are worth, the decline in house prices reflects high rates of default and foreclosure.

But when prices are falling, the real interest rate exceeds the nominal rate.

Rising house prices gave people the illusion that increasing wealth backed their borrowing.

But this time, despite historically low mortgage interest rates, house prices have continued to fall and are now more than 10 lower in real terms than they were two years ago.

The fall in house prices also led to a sharp rise in mortgage defaults and foreclosures, which has increased the supply of homes on the market and caused house prices to fall further.

Historically, real rates have jumped around a lot, showing little correlation with asset prices.

Real GDP per capita (in 1992 prices) declined from 890 to 116 in 2004.

Commercial real estate prices fell from May to June this year by an alarming 4 .

Moreover, real estate prices will most likely stop rising rapidly indeed, they may even decline.

But even optimists don t believe that real estate prices will increase substantially any time soon.

Many countries are seeing vigorous growth in prices for housing, commercial real estate, or both.

Raising prices is almost never a real problem. Lowering them or making them rise more slowly than prices in competing countries is painful and unnerving.

With house prices declining, fewer Americans will be willing and able to continue their profligacy.

In this scenario, bond prices in post industrial countries are heading for a serious fall as are real estate prices in California, New York, and London.

But if real interest rates rise significantly, as well they might someday, gold prices could plummet.

But house prices have since fallen some 40 on average, leaving one third of homeowners with mortgages owing more than their house is worth.

Some recent data suggest that the decline in house prices may be coming to an end.

But the dependence of the whole structure on continually rising house prices was rarely made explicit.

All of this may have caused a temporary improvement in house prices. In short, we will have to wait for the data on house prices in June and July to know whether there has been a permanent turnaround.

In contrast, real oil prices were flat leading up to 1929, and down nearly 50 in real terms from the 1925 6 fuel folly peaks.

In the near future, substantially higher oil prices, lower real estate prices, or both, could, depending on public reaction, put Bernanke into uncharted territory for economic stress.

42. Even though commodity prices have on average improved in 1994, the prospects of a sustained long term increase in commodity prices in real terms appear dim.

Asset prices stocks, commercial real estate, and even oil are, historically, at high levels around the world.

Until now, the future course of real estate prices has been merely a matter of diverse opinion.

Housing prices are being propped up temporarily by myriad subsidies, while a commercial real estate tsunami looms.

Real GDP and estimates of growth rates in the ESCWA region at constant 2000 prices, 2001 2005

The growing gap between mortgage debts and house prices will continue to increase the rate of defaults.

The timing of the inevitable policy shift back to tightening depends on overall inflation, particularly house prices.

But, now that house prices have collapsed and credit is unavailable to underwater households, demand has plummeted.