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Inflation Adjusted House Prices 3.8% Below Peak


by Calculated Risk on 12/29/2022 10:14:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Inflation Adjusted House Prices 3.8% Below Peak; Houses are the least “affordable” since 1982 when 30-year mortgage rates were over 14%


It has been over 16 years since the bubble peak. In the October Case-Shiller released Tuesday, the seasonally adjusted National Index (SA), was reported as being 62% above the bubble peak in 2006. However, in real terms, the National index (SA) is about 12% above the bubble peak (and historically there has been an upward slope to real house prices). The composite 20, in real terms, is about 2% above the bubble peak.

Both indexes have declined for five consecutive months in real terms (inflation adjusted).

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 $200,000 in January 2000, the price would be almost $339,000 today adjusted for inflation (69.5% increase). That is why the second graph below is important – this shows “real” 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 3.8% below the recent peak, and the Composite 20 index is 5.1% below the recent peak in 2022.

In real terms, house prices are still above the bubble peak levels. There is an upward slope to real house prices, and it has been over 16 years since the previous peak, but real prices are historically high.

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