Global Pendulum
English

Issue 1 · Late October 2026

Real rate → Real house prices (8 economies)

Common explanation (Direct mechanism · opposite direction): When real interest rates rise, house prices in many countries then weaken.

This issue: Real rate at 100 (hot), Real house prices (8 economies) at 22 (cool) — Real rate above normal, Real house prices (8 economies) below normal, in line with the common explanation (this is an inverse link).

Hot and cold describe position, not good or bad: warm does not mean a fall is coming, and an extreme reading does not mean a quick reversal. We describe history only, with no buy or sell advice.

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Where it stands now

Where the two indicators stand this issue

Real rate: 100 (Now 2.89%). Real house prices (8 economies): 22 (Median position across economies).

Tests

Does this link hold up?

  1. Common explanationWhen real interest rates rise, house prices in many countries then weakenSource: Federal Reserve Board, “House Prices and Monetary Policy: A Cross-Country Study” (2005). The source uses each country’s own real long-term interest rate; using the US 10-year real yield to stand for all of them is this site’s simplification. The source’s “4 quarters” is the median time before 44 house-price peaks at which real rates began to rise.
  2. Tested against our dataBy position (each compared with its own normal — do their highs and lows move together?): agreement between Real rate and Real house prices (8 economies) (12-month lag) is +0.68 (an opposite-direction link: the raw correlation is −0.68, and a negative correlation fits, so the sign is flipped); across every 5-year period (shifted one year at a time), the two moved in that direction in 6 of 8; data start only in 2013.By change (how far each position moved over the past 12 months — do their swings move together?): agreement +0.61; the two moved in that direction in all 7, but that does not mean they always will.
    By position6/8
    By change7/7
    Each cell is a five-year period (shifted one year at a time): filled = in step with the common explanation, outlined = out of step.
    Supported by both measures
  3. Periods when it did not holdAcross the 5-year periods (shifted one year at a time, so they overlap), the periods out of step cover — by position (8 periods): 2013⁠–⁠2018; by change (7 periods): none.
  4. Does it predict?Prediction test (a historical test, unrelated to “Where it stands now” above and not this site’s forecast): does adding the past 12 months of Real rate make Real house prices (8 economies) easier to predict? Result: No predictive link found (p = 0.726; the smaller, the less likely by chance). Forecasting a recent stretch of data not used for estimation, the error is 9.3% higher.No link found

History

The two lines, overlaid

Data: Federal Reserve H.15 (DFII10), via FRED (Federal Reserve Bank of St. Louis); Bank for International Settlements (BIS), residential property prices (inflation-adjusted). Positions: our calculation.

Real rateReal house prices (8 economies)

Time lag

At what lag do they match best?

Longer bar = moves more in the direction of the common explanation (the number is the agreement).

Limits

What this card cannot tell you

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