Inflation Adjusted House Prices 3.8% Below Peak; Price-to-rent index is 8.4% below recent peak

Today, in the Calculated Risk Real Estate Newsletter: Inflation Adjusted House Prices 3.8% Below Peak; Price-to-rent index is 8.4% below recent peak

Excerpt: It has been over 17 years since the bubble peak. In the April Case-Shiller house price index released yesterday, 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 11% above the bubble peak (and historically there has been an upward slope to real house prices).  The composite 20, in real terms, is 1% above the bubble peak.

The inflation adjusted indexes increased in real terms in April using CPI ex-shelter.

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 $341,000 today adjusted for inflation (70.5% 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.