Here is the earlier post on Case-Shiller: Case-Shiller: National House Price Index increased 6.3% year-over-year in December
It has been more than ten years since the bubble peak. In the Case-Shiller release this morning, the seasonally adjusted National Index (SA), was reported as being 7.0% above the previous bubble peak. However, in real terms, the National index (SA) is still about 11.1% below the bubble peak (and historically there has been an upward slope to real house prices).
The year-over-year increase in prices is mostly moving sideways now around 6%. In December, the index was up 6.3% YoY.
Usually people graph nominal house prices, but it is also important to look at prices in real terms (inflation adjusted). Case-Shiller and others report nominal house prices. As an example, if a house price was $200,000 in January 2000, the price would be close to $282,000 today adjusted for inflation (41%). That is why the second graph below is important - this shows "real" prices (adjusted for inflation).
Nominal House Prices
The first graph shows the monthly Case-Shiller National Index SA, and the monthly Case-Shiller Composite 20 SA (through December) in nominal terms as reported.
In nominal terms, the Case-Shiller National index (SA) is at a new peak, and the Case-Shiller Composite 20 Index (SA) is back to March 2006 levels (and will probably be at a new high soon).
Real House Prices
The second graph shows the same two indexes in real terms (adjusted for inflation using CPI less Shelter). Note: some people use other inflation measures to adjust for real prices.
In real terms, the National index is back to November 2004 levels, and the Composite 20 index is back to April 2004.
In real terms, house prices are back to 2004 levels.
Price-to-Rent
In October 2004, Fed economist John Krainer and researcher Chishen Wei wrote a Fed letter on price to rent ratios: House Prices and Fundamental Value. Kainer and Wei presented a price-to-rent ratio using the OFHEO house price index and the Owners' Equivalent Rent (OER) from the BLS.
Here is a similar graph using the Case-Shiller National and Composite 20 House Price Indexes.
This graph shows the price to rent ratio (January 2000 = 1.0).
On a price-to-rent basis, the Case-Shiller National index is back to January 2004 levels, and the Composite 20 index is back to October 2003 levels.
In real terms, prices are back to mid 2004 levels, and the price-to-rent ratio is back to late 2003, early 2004 - and the price-to-rent ratio has been increasing slowly.
from Calculated Risk http://ift.tt/2BViFrx
Stay Updated with Latest Business News and Views from All Corners of the World.
Subscribe to:
Post Comments (Atom)
Here's how to invest in the Q3 earnings season as profits re-accelerate despite misplaced recession myths
getty Earnings likely grew for the fifth consecutive quarter in Q3. Top strategists are eyeing 2025 results ahead of what's likel...
-
Before investing your own money into a small business idea, test it out with your target audience. Georgijevic/Getty Images Having a bu...
-
Stocks could crash nearly 50% and a recession might hit this year, B. Riley's Paul Dietrich said. Yuichiro Chino/Getty Images The S...
-
The benchmark S&P 500 index just logged its longest losing streak of 2023, per data from Refinitiv. Mario Tama / Getty US stocks...
No comments:
Post a Comment