The rise in home prices from the trough in 2009 has added $8tn to home values, pushing the value of homes to a level surpassing the 2006 peak (chart 1).

In order to accomplish such dramatic growth, home price growth outpaced nominal household income growth in each of the last six years. In chart 2 below we plot the year-over-year change Case-Shiller home price index (blue line) on top of the year-over-year change in our nominal income proxy (hours worked * employment * average hourly earnings). As we saw from in the period leading up to the financial crises, home price growth can exceed nominal income growth for a long period of time, especially when interest rates are falling, but eventually the excess must be reversed.