Category Archives: Dow/House Price Index

Dow/House Price Index Ratio

On February 11, 2024, we posted the following chart to Twitter:

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What is our take on this chart?  To find out we had to regenerate the same data to the current period, as seen below:

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Russell suggests that the chart indicates that the Dow was cheap when at the lows and housing is cheap when the indicator is higher.  Can housing really be that cheap as the ratio continues to climb higher?

We don’t think so.  Instead, we think that the indicator is merely reflecting the inverse relationship with interest rates.   What we should see is the indicator ultimately getting down to the 1980 level as interest rates rise.

This highlights the importance of obtaining a full cycle before drawing any meaningful conclusions.