Inflation Adjusted House Prices 2.3% Below 2022 Peak
Price-to-rent index is 9.7% below 2022 peak
It has been 20 years since the housing bubble peak, ancient history for many readers. But more timely, it has been 3 year and 8 months since the peak in real house prices.
In the January Case-Shiller house price index released last week, the seasonally adjusted National Index (SA), was reported as being 79.9% above the bubble peak. However, in real terms, the National index (SA) is about 10.2% above the bubble peak (and historically there has been an upward slope to real house prices). The composite 20, in real terms, is 1.8% 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 $450,000 today adjusted for inflation (50% 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) both increased in January, and both are at new all-time highs.
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 2.3% below the recent peak in 2022, and the Composite 20 index is 2.3% below the recent peak in 2022.
The real National index declined slightly and the Comp-20 index increased slightly in January.
It has now been 44 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”.
My initial guess on house prices is “mostly flat to a small decline in prices nationally in 2026”. The increase in inventory is putting downward pressure on house prices and combined with little progress on inflation, real prices will likely decline further in 2026.
In real terms, national house prices are 10.2% above the bubble peak levels. There is an upward slope to real house prices, and it has been 20 years since the bubble peak, but real prices are historically high.
Price-to-Rent Ratio
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