In Depth Analysis: CalculatedRisk Newsletter on Real Estate (Ad Free) Read it here.

Sunday, September 08, 2024

Inflation Adjusted House Prices 1.6% Below 2022 Peak; Price-to-rent index is 7.7% below 2022 peak

by Calculated Risk on 9/08/2024 10:52:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Inflation Adjusted House Prices 1.9% Below 2022 Peak

Excerpt:

It has been over 18 years since the bubble peak. In the June Case-Shiller house price index released last week, the seasonally adjusted National Index (SA), was reported as being 73% 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 2% 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 $432,000 today adjusted for inflation (44% 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.
...
Real House PricesThe second graph shows the same two indexes in real terms (adjusted for inflation using CPI).

In real terms (using CPI), the National index is 1.6% below the recent peak, and the Composite 20 index is 2.0% below the recent peak in 2022. Both indexes increased in June in real terms boosted by the slight month-over-month decline in inflation in June.