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.com
Help fight the bailout! Sign the petition to Congress at AngryRenter.com.
Other housing bubble resources:
Blogs
- Bubble Meter, Blogspot
- Realty Check with Diana Olick, CNBC
- The Housing Bubble, TheHousingBubbleBlog
- Hot Property, BusinessWeek
Video
- Real Estate Roller Coaster (Fun!), SpeculativeBubble.com, 4/2/2007
- Real Estate Bubbles, Part 1, Department of Economics, Humboldt State University, 11/30/2006
- Real Estate Bubbles, Part 2, Department of Economics, Humboldt State University, 11/30/2006
- Real Estate Bubbles, Part 3, Department of Economics, Humboldt State University, 11/30/2006
- Housing Bubble Interview, First Business Morning News, 11/3/2006
- Princeton Economist Paul Krugman on the Housing Bubble, The Bloomberg Report, 9/10/2006
- Economics Roundtable: Housing Boom or Bubble?, University of California, San Diego, 4/3/2006
- Bubbles (Stocks & Housing) and How You Can Protect Yourself, CEPR, 11/10/2005
Economic Analysis
- 2007 Housing Bubble Update: 10 Economic Indicators to Watch, CEPR, 2/2007
- The Menace of an Unchecked Housing Bubble, CEPR, 3/30/2006
- Will a Bursting Bubble Trouble Bernanke?, CEPR, 11/8/2005
- That Hissing Sound, The New York Times, 8/8/2005
- The Housing Bubble Fact Sheet, CEPR, 7/2005
- The Global House Price Boom, International Monetary Fund, 9/2004
- When Bubbles Burst, International Monetary Fund, 4/2003
Data sources and methodology:
- Latest quarterly, median, existing, single-family home price provided by the National Association of Realtors.
- Trailing house price index data provided by Standard & Poors and the Office of Federal Housing Enterprise Oversight.
- Inflation data provided by the U.S. Department of Labor's Bureau of Labor Statistics.
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.
