Single Family Home Prices, Inflation Adj (1970-2009)
Have prices reverted back to historic norms yet?
Even after the 2.3% decrease in median home prices, the short answer is no. Consider the following from Chart of the Day, who note:
“For some perspective into the all-important US real estate market, today’s chart illustrates the US median price of a single-family home over the past 39 years. Not only did housing prices increase at a rapid rate from 1991 to 2005, the rate at which housing prices increased – increased.
That brings us to today’s chart which illustrates how housing prices are currently 30% off their 2005 peak. In fact, a home buyer who bought the median priced single-family home at the 1979 peak has seen that home appreciate by a mere 4%. Not an impressive performance considering that three decades have passed. Over the past two months, single-family home prices have resumed their decline and remain (until proven otherwise) in an accelerated downtrend.”
I have annotated the COTD below, showing 3 distinct phases of the acceleration in price appreciation: From 1) During the Bull market 1985-1996; 2) Then following an advantageous tax change, ~1997 -2002. and then 3) After rates came down to 1% in 2003, housing went ballistic.
>
Courtesy of Chart of the Day
Tweet
Facebook
Reddit
Digg this!
September 26th, 2009 at 3:20 pm
BR says-
“Have prices reverted back to historic norms yet . . .the short answer is no.”
and the Fed/USG will do everything in their power to keep it from happening w/ subsidized mortgage rates and tax credits to purchase a home-
however- i think they will lose that battle
September 26th, 2009 at 3:34 pm
Parabolas, in this context, are a, seeming, paradox–Nature fosters them, and, at the same time, abhors them.
as an aside, a long-lost Classmate said, more than once, ~”When he came back, he wanted to come back as an asymptote~”. Others would ask Why?, His response, “So I can F*** w/ Everything.”
Last I heard tell of him, he was busy picking out the color-scheme of his Luxe-Box in J. Jones’ new Texas Stadium..
needless to say, it was hardly a Surprise.
September 26th, 2009 at 3:47 pm
Historically, isn’t it normal for there to be an overshoot to the downside?
September 26th, 2009 at 3:48 pm
“…today’s chart … illustrates how housing prices are currently 30% off their 2005 peak. In fact, a home buyer who bought the median priced single-family home at the 1979 peak has seen that home appreciate by a mere 4%”.
All the more amazing when one considers the various government programs to support housing (e.g., Fannie & Freddie, and the tax benefits).
By comparison, stocks haven’t done so poorly over that time period, even after adjusting for inflation:
http://home.earthlink.net/~intelligentbear/com-dj-infl.htm
September 26th, 2009 at 4:15 pm
Anyone know were this data might be located for individual states?
September 26th, 2009 at 4:31 pm
I’m not sure that’s a very accurate representation of the what is happening out here in flyover land. While the cheap/easy money surely drove up prices faster than “normal”….they never approached the madness seen around LA/PHX/LV/FL.
Has anyone else looked at South FL prices lately??
Just wow.
Locally the market seems to be moving along just fine. My banker says they were swamped with refis, and now they are swamped with first time buyers. I guess we’ll see what happens when the big tax bennies go away.
Farmland is still holding up very well….especially anything with live water.
September 26th, 2009 at 7:26 pm
So, here’s the deal. I was a responsible house buyer (thankfully in 2000 in Baltimore). My wife and I want to buy a beach house on LBI (NJ) within the next couple of years. The prices on the island haven’t come back down (not even close) to where they were around 2000. My question is, can we hope for a reversion to the mean in the near future? Are the Jumbo ARM mortgages due to reset soon? Is there any way to find that out? I have started to see some short sales and foreclosures on the island, but there isn’t, so far, a mad dash to the exits. I know that this is a tough question, but what would be a good sign that it’s time to start seriously looking at properties?
Anyway, thanks fellas!
Jeff
September 26th, 2009 at 8:14 pm
Has anyone seen a cost per month of carrying a tradition mortgage across the decades– it seems the FED is trying to make home prices go up under the hydraulic pressure of low rates– just curious how long this happens for– at some point there is a correlation to rents and rents high than the cost to own on a cash flow basis.
September 26th, 2009 at 8:19 pm
there’s no way that graph is correct for 1970. the median price was a litle over $120,000? no way. try 1/3 to 1/4 of that.
~~~
BR: Its inflation adjusted, probably chained to 2000 dollar .
September 27th, 2009 at 2:18 am
Leverage really juices that 4% return, though. Even a lowly 2% annual housing price increase can turn into a decent investment when you borrow 80%.
I don’t expect it to work out too well if you bought between 2003 and 2008….
September 27th, 2009 at 6:18 am
Houses have gotten a lot bigger in the last thirty, forty years. The larger number of square feet per house distorts the picture a lot.
The graph should be adjusted and show the price per square foot , inflation adjusted. If it were shown that way, the price will be lower and might even be at 1970 levels.
September 27th, 2009 at 6:19 pm
What “tweetie” said.
I was just about to say the same thing, when I read tweetie’s comment. Is the graph that tweetie is asking about anywhere? THAT would be helpful.
September 27th, 2009 at 7:11 pm
I agree with oldsouth40. There is no way the median house was $120K.
Redo your numbers.
September 27th, 2009 at 9:48 pm
It would be interesting to know the historic ratio between the average home price and average household income. I’m assuming it would have stayed fairly constant for decades, until the advent of the home-and condo-buying/flipping boom of earlier this decade.
So, if we compare this historic ratio with the current relationship between household income and home prices, we can see how far down there still is to go.
September 28th, 2009 at 12:29 pm
how do you account for population increase? It seems that if the population keeps increasing, single family homes will increase at a faster rate due to supply and demand. At least until some steady state (high) level has been reached.
September 28th, 2009 at 12:32 pm
The median is rising because more transactions are occurring above the median price than below…things are getting worse.
Think about it.