HOUSING PRICES IN PERSPECTIVE
For some perspective on the all-important US real estate market, today’s chart illustrates the inflation-adjusted median price of a single-family home in the United States over the past 41 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 the inflation-adjusted median home price is currently 38% off its 2005 peak. That’s a $100,000 drop. In fact, a home buyer who bought the median priced single-family home at the 1979 peak has actually seen that home lose value (8.5% loss). Not an impressive performance considering that more than three decades have passed. It is worth noting that the median priced home is currently in the bottom half of a price range that existed from the late 1970s into the mid-1990s.
Notes:
- Where’s the market headed? The answer may surprise you. Find out right now with the exclusive & Barron’s recommended charts of Chart of the Day Plus.
this study must have excluded bay area RE price.
Tells you everything you need to know about the Criminal cabal of Real Estate, Mortgage< Banking, and Financials that made this bubble and multiplied it.
The all should be dead.
Of course, the people who leveraged themselves to the hilt to push prices up and/or buy at the top aren’t culpable at all. The system has its flaws, but nearly everyone played along. Let’s not be so simplistic as to carry on about how it’s all the fault of the bankers.
Let’s not be so simplistic that the homeowners are not the entire cause. Every person that brings up that side of the argument is usually a banker or mortgager.
Here is the news skeezix, the bankers are in the BUSINESS OF MORTGAGES, and why the heck are they taking such a risk and even considering giving a loan to people they KNOW CANNOT PAY??? The banks are CENTRAL to the problem, and it is THEIR risk and THEIR PROBLEM. Whatever happened to risk aversion in loaning and a proper “qualification” of loan recipients???
Cry me a river for the banks, I don’t care. With what they did and how the did things in the mortgage bubble they all should be in prison.
I just wish as much ill as I can for them. I would like for ALL OF THEM to lose EVERYTHING they have for their corrupt business practices.
NO OTHER business takes on risk like that, why defend bankers and mortgage houses???
When you consider that the median wage is roughly where it was in 1979 this makes a lot of sense. I think that the median price will trend back to $150 000 because real wage growth is so weak. I cannot see any fundemental reason why they are as high as they are now. Big falls lie ahead.
As average family income has not increased since the 1980s it only stands to reason that average home prices need to fall back to that level.
Actually, adjusted for inflation, wages are flat for the bottom 90% since 1971
http://fatboysez.blogspot.com/2011/04/soon-middle-class-will-be-forced-to.html
In which case we can see median house prices falling back to $120 000. It does seem that with all the activity on Wall Street, Main street still suffers and politicians are ignoring the real problem of unemployment.
I am very suspicious of this data.
Looks like it was manipulated to make it look like a good time to buy.
I’d guess the data is sound. The chart should show decades prior to the 70′s. If so, that trend line would show prices should have another 20-40% further to fall. But, it wouldn’t take into consideration the toxic attitude that follows the bursting of bubbles. Be it Tulib bulbs, Japan real estate and equities or the NASDAQ. Similar to Shillers comments regarding house prices when he compared the lose of faith in the current system to that which occurred during the depression. The hard to define intangibles.
This chart shows that it’s getting attractive to buy. People dumping houses today are making a serious mistake. It’s wrong to use average family income to judge long term housing price from today. It’s global competition now. With agriculture boom and growing population (especially immigrants who need immediate housing), U.S. land in general will appreciate in value. Transportation cost will go up. People will be forced to live in more dense communities. That means urban land price will go up. Commodities are getting increasingly expensive, material cost will go up. Labor cost may not go up much, but the nominal cost has already bottomed, it will be in uptrend in the coming years. Most importantly, interest rates is low and will stay relatively low compared to historical normal.
Affordability is a poor measure for existing houses. Housing price is more about the cost and the return in investment compared to other assets. It’s the rent/buy ratio, maintenance expense, interest rate, and long term fundamental that matters. Many condos in U.S. today excluding condo fees and property taxes already yield more than 4%. America still has a growing population and a growing economy. If housing price continue at today’s level, the rent/buy ratio will only get better. An average guy on the street may not understand this, but I am surprised to see all the comments above here. If you take a trip around the world, you’ll be surprised how cheap U.S. property is today.
You sell Real Estate, don’t you? Or you’re house, condo is on the market. “Many condos in U.S. today excluding condo fees and property taxes already yield more than 4%.” First of all, why exclude built in costs of assoc. fees and taxes? Secondly, I have no idea how you derive a 4% yield from condos?
No, I am buying. To me it is an obvious bet. For the ones I invested, I don’t pay anything other than 20% down pay. The tenants pay everything including mortgage. Condos at non-prime location that have easy access to public transportation are where you can find the best deals today.
down a lot but, still a falling knife.
Take a look at the UK, esp. London. House prices are still in a massive bubble (and are near/above 2007 levels in the capital). Most home owners (debt holders) are on variable rate mortgages, so their monthly repayments dropped circa 80%+ after base rates went to near zero. Therefore there’s been no forced sales driving prices down, with hundreds of thousands of such home owners effectively squatting in houses they can’t really afford (at the expense of the prudent savers as CPI goes above 4%).