House Prices and Foreclosures

(Source: Boston Fed.)

This is data just for Massachussetts.

There are two ways to interpret this graph:

The rise in prices predicts foreclosures. It suggests that people bought houses they couldn't really afford on their incomes.

The second is that if you look at prices, they didn't hit the 0% growth mark until after foreclosures had taken off. That suggests that people were buying houses with the implicit assumption of rising prices.

Both, of course, are familiar to people who have been following this mania.