Markets
Chart: U.S. Home Price Growth Over 50 Years
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Chart: U.S. Home Price Growth Over 50 Years
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U.S. home prices grew significantly in 2022, even as interest rates climbed higher.
Yet in inflation-adjusted terms, this growth rate was far lower. By Q4 2022, it fell to being flat year-on-year, making it the slowest real growth seen in a decade.
The above graphic compares nominal and real residential property price growth over 50 years based on the latest data from the Bank for International Settlements (BIS).
Nominal vs. Real Home Price Growth
In 2022, opposing forces of rising mortgage rates and a narrow supply of housing produced a moderate nominal growth rate of just over 7% as of Q4 2022. That said, real price growth dropped to 0% over the period.
Here’s how that looks in context of the recent highs and lows of housing price growth:
| Nominal Home Price Growth Year-over-Year | Real Home Price Growth Year-over-Year |
|
|---|---|---|
| Q4 2022 | 7.1% | 0.0% |
| Peak | 19.5% (Q1 2022) | 12.9% (Q2 2005) |
| Low | -16.9% (Q4 2008) | -19.5% (Q3 2008) |
Recent Highs: During the pandemic, growth hit almost a 20% year-over-year rate by Q1 2022, which was record home price growth at the time. It was driven by ultra-low interest rates and remote work leading people to seek out more space.
Recent Lows: In both real and nominal terms, home price growth sank to their lowest levels in 2008. The property market crashed after a wave of easing lending requirements. This flooded the market with an oversupply of houses as subprime homeowners couldn’t afford to make payments, leading prices to plummet.
Factors Influencing Home Price Growth
Today, a mix of factors are supporting nominal house prices.
First, the housing supply remains low. Total existing inventory stood at 1 million in April, under half the four-decade average. As interest rates have increased, homeowners have been hesitant to sell and the number of mortgage applications has fallen. In turn, this is pushing prices higher.
In fact, the majority of primary mortgages have interest rates locked in under 4%. As of May 4, the average 30-year fixed mortgage rate stood much higher, at 6.4%.
Along with this, new home sales are falling.
After hitting a 15-year peak in 2021, sales sank almost 27% year-over-year in April. New home sales are often considered a leading indicator for the residential market.
Wider Implications
The U.S. residential market is valued at about $45 trillion, and has historically been highly sensitive to interest rates.
While the rapid increase in interest rates haven’t yet had a major impact on housing prices, some cracks are beginning to show.
On the other hand, if prices remain stubborn, it may contribute to inflationary pressures, leading the Federal Reserve to continue with rate increases, given the market’s sheer size and influence on the overall U.S. economy.
Markets
The European Stock Market: Attractive Valuations Offer Opportunities
On average, the European stock market has valuations that are nearly 50% lower than U.S. valuations. But how can you access the market?
European Stock Market: Attractive Valuations Offer Opportunities
Europe is known for some established brands, from L’Oréal to Louis Vuitton. However, the European stock market offers additional opportunities that may be lesser known.
The above infographic, sponsored by STOXX, outlines why investors may want to consider European stocks.
Attractive Valuations
Compared to most North American and Asian markets, European stocks offer lower or comparable valuations.
| Index | Price-to-Earnings Ratio | Price-to-Book Ratio |
|---|---|---|
| EURO STOXX 50 | 14.9 | 2.2 |
| STOXX Europe 600 | 14.4 | 2 |
| U.S. | 25.9 | 4.7 |
| Canada | 16.1 | 1.8 |
| Japan | 15.4 | 1.6 |
| Asia Pacific ex. China | 17.1 | 1.8 |
Data as of February 29, 2024. See graphic for full index names. Ratios based on trailing 12 month financials. The price to earnings ratio excludes companies with negative earnings.
On average, European valuations are nearly 50% lower than U.S. valuations, potentially offering an affordable entry point for investors.
Research also shows that lower price ratios have historically led to higher long-term returns.
Market Movements Not Closely Connected
Over the last decade, the European stock market had low-to-moderate correlation with North American and Asian equities.
The below chart shows correlations from February 2014 to February 2024. A value closer to zero indicates low correlation, while a value of one would indicate that two regions are moving in perfect unison.
| EURO STOXX 50 | STOXX EUROPE 600 | U.S. | Canada | Japan | Asia Pacific ex. China |
|
|---|---|---|---|---|---|---|
| EURO STOXX 50 | 1.00 | 0.97 | 0.55 | 0.67 | 0.24 | 0.43 |
| STOXX EUROPE 600 | 1.00 | 0.56 | 0.71 | 0.28 | 0.48 | |
| U.S. | 1.00 | 0.73 | 0.12 | 0.25 | ||
| Canada | 1.00 | 0.22 | 0.40 | |||
| Japan | 1.00 | 0.88 | ||||
| Asia Pacific ex. China | 1.00 |
Data is based on daily USD returns.
European equities had relatively independent market movements from North American and Asian markets. One contributing factor could be the differing sector weights in each market. For instance, technology makes up a quarter of the U.S. market, but health care and industrials dominate the broader European market.
Ultimately, European equities can enhance portfolio diversification and have the potential to mitigate risk for investors.
Tracking the Market
For investors interested in European equities, STOXX offers a variety of flagship indices:
| Index | Description | Market Cap |
|---|---|---|
| STOXX Europe 600 | Pan-regional, broad market | €10.5T |
| STOXX Developed Europe | Pan-regional, broad-market | €9.9T |
| STOXX Europe 600 ESG-X | Pan-regional, broad market, sustainability focus | €9.7T |
| STOXX Europe 50 | Pan-regional, blue-chip | €5.1T |
| EURO STOXX 50 | Eurozone, blue-chip | €3.5T |
Data is as of February 29, 2024. Market cap is free float, which represents the shares that are readily available for public trading on stock exchanges.
The EURO STOXX 50 tracks the Eurozone’s biggest and most traded companies. It also underlies one of the world’s largest ranges of ETFs and mutual funds. As of November 2023, there were €27.3 billion in ETFs and €23.5B in mutual fund assets under management tracking the index.
“For the past 25 years, the EURO STOXX 50 has served as an accurate, reliable and tradable representation of the Eurozone equity market.”
— Axel Lomholt, General Manager at STOXX
Partnering with STOXX to Track the European Stock Market
Are you interested in European equities? STOXX can be a valuable partner:
- Comprehensive, liquid and investable ecosystem
- European heritage, global reach
- Highly sophisticated customization capabilities
- Open architecture approach to using data
- Close partnerships with clients
- Part of ISS STOXX and Deutsche Börse Group
With a full suite of indices, STOXX can help you benchmark against the European stock market.
Learn how STOXX’s European indices offer liquid and effective market access.
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