Every few weeks, a client or a friend asks me some version of the same question: when are home prices finally going to come down? It came up again just this past weekend. And I get why people expect it — the last time prices ran up like this, they turned around and fell off a cliff. So surely we're due for a repeat, right?

I've been doing this for 24 years, and my honest answer is that I don't try to guess the top. I try to understand what's actually holding values up. So here's how I think about it — and the one chart I keep coming back to.

Start with the outliers

Let's set the outlier events aside for a second. We've all gotten used to the once-in-a-lifetime stuff happening more often, but the truth is nobody can predict those events — or which direction they'll push the market when they hit.

Case in point: almost no real estate "expert" saw a global pandemic coming, or that it would lead the government to push roughly six trillion dollars into the system. I raise it because that's exactly what makes this last spike different from the ones before it.

Why this cycle doesn't look like the last one

This is where my finance and accounting background tends to take over. I like a clean, credible data source, and the one I find myself studying is the M2 money-supply chart. Lay it over the home-value chart for the same stretch of time, and something jumps out.

During the 2003–2008 run, home values climbed but the money supply barely moved. That run was driven by loosening credit — and it turned out to be unsustainable.

The COVID run-up was a different animal. Demand surged on very low interest rates, but this time the money supply grew right alongside it — almost the same shape on the chart. Both peaked around April 2022. Both eased afterward. And both have trended back upward since. That difference is what makes me wonder whether it's the reason this run-up has held for six-plus years instead of collapsing.

So when do they come down?

What goes up comes down — I believe in that. The hard part is the timing, and timing the market is just about impossible. The reason I bring the money supply into the conversation is this: I suspect home values won't drop in a real way until the money supply itself contracts.

So the question I'd actually be asking is, what would it take to pull that money back out of the system? My guess is that meaningful price declines show up somewhere near whenever that happens.

That's how I read it — but I'm genuinely curious whether you see it the same way.

One more thing — foreclosures are ticking up.

More on that in the next article.