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Inflation Adjusted House Prices 2.3% Below Peak

by Calculated Risk on 10/27/2022 10:12:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Inflation Adjusted House Prices 2.3% Below Peak

Excerpt:

It has been over 16 years since the bubble peak. In the Case-Shiller release Tuesday, the seasonally adjusted National Index (SA), was reported as being 64% above the bubble peak in 2006. However, in real terms, the National index (SA) is about 13% above the bubble peak (and historically there has been an upward slope to real house prices). The composite 20, in real terms, is about 4% above the bubble peak.

Both indexes have declined for three consecutive months in real terms (inflation adjusted).

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 almost $338,000 today adjusted for inflation (69% increase). That is why the second graph below is important – this shows “real” prices. …

The second graph shows the same two indexes in real terms (adjusted for inflation using CPI less Shelter). Note: some people use other inflation measures to adjust for real prices. In real terms, the National index is 2.3% below the recent peak, and the Composite 20 index is 3.0% below the recent peak in early 2006.

In real terms, house prices are still above the bubble peak levels. There is an upward slope to real house prices, and it has been over 16 years since the previous peak, but real prices are historically high.

There is much more in the article. You can subscribe at https://calculatedrisk.substack.com/

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