The Case-Shiller home price index came out yesterday and the 20 city index is now appreciating at a rate not seen since the bubble days of last decade. The cities at the top of the appreciation list reads like a who's who of the good old bubble days with Las Vegas, Phoenix and Miami all making the top 10 along with a host of California cities. For the index as a whole, prices were up 12.1% year over year. San Francisco, at the top of the list, saw a rise twice that much. 

Meanwhile, home owership rates in the US are down to 18 year lows and one is left wondering how prices could be going up that fast if the ownership rate is still dropping. Actually, one doesn't have to wonder. One just has to figure out how the banks and shadow banks are cleaning up at the expense of the people now priced out of the market. Part of the problem is that government agencies like FHA have been doing sweetheart deals with private equity funds to clear their REO properties without disrupting what is left of the housing "market". Despite trying to find ways to dump their inventory without pushing prices down for anyone except the big money boys, FHA is still sitting on 190,000 REO properties and there are still 2.7 million "homeowners" covered by GSE type insurance that are at least one payment in arrears. I guess they can go and rent from Blackstone after they are finally foreclosed on. 

The bottom line is that with the demand from private equity funds and cheap financing from the Fed, house prices are now once again partying like its 2004. That isn't good for anyone who wants to buy a house but it is damn good for banks which is of course the real target of all Fed policy. Those policies - mostly ZIRP in this case - may have assisted the banks and GSEs in partially getting rid of their problems from the last bubble but they haven't done squat for household incomes. Real potential home buyers - those who actually want to live in them - are priced out of the market and forced to rent in a market with low vacancy rates and rising rents. Call me crazy but I think our economy would be better off with cheaper houses, fewer too big to fail banks and private equity investing in real businesses. 

One has to wonder what might have been if the capital poured into the housing market - again - had been invested in something more productive. What new Google or Facebook or Intel didn't get funded because Blackstone got a better deal from FHA and the Fed investing in used houses?