by Calculated Risk on 11/01/2023 12:19:00 PM
Today, in the Calculated Risk Real Estate Newsletter: Inflation Adjusted House Prices 3.1% Below Peak; Price-to-rent index is 7.0% below recent peak
It has been over 17 years since the bubble peak. In the August Case-Shiller house price index released yesterday, the seasonally adjusted National Index (SA), was reported as being 68% above the bubble peak in 2006. However, in real terms, the National index (SA) is about 9% above the bubble peak (and historically there has been an upward slope to real house prices). The composite 20, in real terms, is at the bubble peak.
People usually graph nominal house prices, but it is also important to look at prices in real terms. As an example, if a house price was $200,000 in January 2000, the price would be $362,000 today adjusted for inflation (81% increase). That is why the second graph below is important – this shows “real” prices.
The third graph shows the price-to-rent ratio, and the fourth graph is the affordability index. The last graph shows the 5-year real return based on the Case-Shiller National Index.