Inflation Adjusted House Prices 3.9% Below Peak

Price-to-rent index is 7.1% below recent peak

It has been 17 years since the bubble peak. In the December Case-Shiller house price index released on Tuesday, the seasonally adjusted National Index (SA), was reported as being 61% 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 about 1% above the bubble peak.

These inflation adjusted indexes have been declining for seven months in real terms.

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 third graph shows the price-to-rent ratio, and the fourth graph is the affordability index.