One of the metrics we'd like to follow is a ratio of house prices to incomes. Unfortunately most income data is released with a significantly lag, and there are always questions about which income data to use (the average total income is skewed by the income of a few people).
And for key measures of house prices - like Case-Shiller - we have indexes, not actually prices. But we can construct a ratio of the house price indexes to some measure of income.
This graph shows the ratio of house price indexes divided by the National Average Wage Index (the Wage index is first divided by 1000). This uses the annual average National Case-Shiller index since 1976 (and an estimate for 2021). Note: The national wage index for 2021 is estimated using the average increase over the last five years.
As of 2021, house prices were well above the median historical ratio - and not far below the bubble peak.
By this measure, house prices are close to the bubble peak.
However, as I noted in The Housing Conundrum:
Demographics are favorable for home buying.
Mortgage rates are near record lows (but increasing).
Lending standards have been fairly solid.
And housing inventory is near record lows.
So, by some measures, house prices seem high, but the recent price increases make some sense from a supply and demand perspective.
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