by Calculated Risk May 29, 2024, 10:34 AM
Today’s Calculated Risk Real Estate Newsletter: Inflation-adjusted home prices are 2.2% lower than their peak
excerpt:
18 years have passed since the peak of the bubble. Case-Shiller Home Price Index Released for March On Tuesday, the seasonally adjusted National House Price Index (SA) was reported to be 72% higher than its bubble peak in 2006. But in real terms, the National House Price Index (SA) is about 10% higher than its bubble peak (and historically, real house prices have been trending up), while the Composite 20 is, in real terms, 1% higher than its bubble peak.
Typically people graph nominal home prices, but it’s important to look at real prices too. For example, if a home cost $300,000 in January 2010, the inflation-adjusted price would be $431,000 today (a 44% increase). That’s why the second graph below is important – it shows “real” prices.
The third graph shows the price-to-rent ratio, the fourth graph shows the Home Affordability Index, and the final graph shows five-year real returns based on the Case-Shiller National Index.
…The second chart shows the same two indexes in real terms (adjusted for inflation using the CPI).
In real terms (using the CPI), the national index is 2.2% below its recent peak.and the Composite 20 index is 3.1% below its recent peak for 2022. Both indexes were down slightly in real terms in March.
