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Recently, there has been a lot of discussion about the bursting of the U.S. housing bubble. Some economists claim housing prices are near a bottom, while others claim that the real estate bubble is the largest financial bubble in history and still has far to fall. This site aims to add to the housing bubble debate with inflation-adjusted graphs and spreadsheets showing that today's real estate prices are quite abnormal, especially for many coastal metropolitan areas. |
![]() The above chart estimates the market value of today's median-priced house over a 33-year period. The red line represents real house prices. For those unfamiliar with economic-speak, "real" prices are prices that have been adjusted for inflation. The blue line represents nominal house prices. Notice that in the 25-year period from 1975 through 1999, real house prices stayed roughly within the range of $132,000 to $171,000. Only since the year 2000 have real house prices risen above the top of this range. The United States median price was at approximately $206,500 as of the second quarter of 2008. This is 21% higher than the previous housing boom peak of an inflation-adjusted $170,900 in 1989. For an annualized graph depicting over a century of inflation-adjusted U.S. housing prices based on Yale University economics professor Robert Shiller's data, click here. View housing price graphs for major metropolitan areas:I blog about the housing bubble decline at bubblemeter.blogspot.comHelp fight the bailout! Sign the petition to Congress at AngryRenter.com. Other housing bubble resources:Blogs
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Economic Analysis
Data sources and methodology:
The chart on this page estimates the market value of today's median-priced house over a 33-year period. The trailing nominal prices are derived by taking the recent median price of existing single-family homes, as reported by the National Association of Realtors, and discounting it by the S&P/Case-Shiller Home Price Index. Prior to 1987, the OFHEO House Price Index is used. The S&P/Case-Shiller HPI and OFHEO HPI are "constant quality" indices, so even though houses are built larger today than they were 33 years ago, this graph automatically adjusts for this variation. The trailing real prices are then derived by adjusting the nominal prices by the CPI - all items less shelter. The measurement of inflation-adjusted housing prices is just one of several tools that can be used to determine if there is a housing bubble. Other possible tools are: measuring historical price-to-rent ratios, measuring changes in residential real estate prices versus commercial real estate prices, and measuring changes in housing affordability. |
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Housing charts and spreadsheets are in the public domain. You are free to copy and modify them.
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This Web site was created by James Harrison Parsons.