Inflation Adjusted House Prices 3.8% Below Peak

Houses are the least “affordable” since 1982 when 30-year mortgage rates were over 14%

It has been over 16 years since the bubble peak. In the October Case-Shiller released Tuesday, the seasonally adjusted National Index (SA), was reported as being 62% above the bubble peak in 2006. However, in real terms, the National index (SA) is about 12% above the bubble peak (and historically there has been an upward slope to real house prices).  The composite 20, in real terms, is about 2% above the bubble peak.

Both indexes have declined for five 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 $339,000 today adjusted for inflation (69.5% increase).  That is why the second graph below is important - this shows "real" prices.

Nominal House Prices

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

In nominal terms, the Case-Shiller National index (SA) and the Case-Shiller Composite 20 index (SA) are both below all times highs set in June. Both indexes declined in October, with the National index off 2.4% from the recent peak, and the Composite 20 index off 3.8%.

Real House 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 3.8% below the recent peak, and the Composite 20 index is 5.1% below the recent peak in 2022.

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.