Inflation Adjusted House Prices 1.4% Below 2022 Peak

Price-to-rent index is 8.1% below 2022 peak

It has been over 18 years since the housing bubble peak. In the September Case-Shiller house price index released last week, the seasonally adjusted National Index (SA), was reported as being 75% above the bubble peak in 2006. However, in real terms, the National index (SA) is about 11% above the bubble peak (and historically there has been an upward slope to real house prices).  The composite 20, in real terms, is 3% above 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 $300,000 in January 2010, the price would be $434,000 today adjusted for inflation (45% 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.

Nominal House Prices

The first graph shows the monthly Case-Shiller National Index SA, and the monthly Case-Shiller Composite 20 SA in nominal terms as reported.

In nominal terms, the Case-Shiller National index (SA) and the Case-Shiller Composite 20 index (SA) are both at all times highs. Both indexes increased in September.

Real House Prices

The second graph shows the same two indexes in real terms (adjusted for inflation using CPI).

In real terms (using CPI), the National index is 1.4% below the recent peak, and the Composite 20 index is 1.6% below the recent peak in 2022. The real National index increased in September, however, the Composite 20 index decreased slightly in real terms.

It has now been 28 months since the real peak in house prices. Typically, after a sharp increase in prices, it takes a number of years for real prices to reach new highs (see House Prices: 7 Years in Purgatory). There is nothing magic about “7 years”, it just made a good post title! Here is an update to the graph I included in that article:

In real terms, national house prices are 11.3% above the bubble peak levels. There is an upward slope to real house prices, and it has been over 18 years since the previous peak, but real prices are historically high.

Price-to-Rent Ratio

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