Home prices recently recovered to early-2004 levels -- or to where they were about three years before the housing bubble peaked. As the housing market continues to rally, retracing price points set more than nine years ago, it raises a question: Is the housing market poised to repeat the boom-and-bust cycle again?
A comparison of related factors shows that while housing prices may be the same as they were in 2004, other things are quite different.
1. Home prices
According to the S&P/Case-Shiller Home Price Indices, composites of housing prices in 10 and 20 major U.S. metropolitan areas have recently recovered to levels originally reached in early 2004. This is the result of a double-digit percentage rally over the past year. Prices were also rising sharply back in 2004, but in that case they had already been on the rise for about seven years. In other words, home prices may once again be rising, but the market is still much earlier into the rally than it was in 2004.
While home prices may seem to be on par with 2004 levels, there has been roughly 23 percent of inflation since then. On an inflation-adjusted basis, housing prices have still lost ground since 2004. This could be another argument for why the housing market is still reasonably priced at this point.