Inflation Adjusted House Prices 3.8% Below 2022 Peak
It has been over 20+ years since the housing bubble peak . Ancient history! More timely, it has been 4 years and 2 months since the peak in real house prices . In the July Case-Shiller house price index released on last week, the seasonally adjusted National Index (SA) was reported as being 80.5% above the bubble peak. However, in real terms, the National index (SA) is about 8.5% above the bubble peak (and historically there has been an upward slope to real house prices). The composite 20, in real terms, is 0.6% above the bubble peak. 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 $300,000 in January 2010, the inflation adjusted price would be $459,000 today (a 53% 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. Nominal House Prices The first graph shows the monthly Case-Shiller National Index SA, and the monthly Case-Shiller Composite 20 SA in nominal terms as reported. In nominal terms, the Case-Shiller National index (SA) is at an all-time high, and the Case-Shiller Composite 20 index (SA) is just below the all-time high. Real House Prices The second graph shows the same two indexes in real terms (adjusted for inflation using CPI). In real terms (using CPI), the National index is 3.8% below the recent peak in 2022 , and the Composite 20 index is 3.5% below the recent peak in 2022. The real National index and the Comp-20 index both increased in July. It has now been 50 months since the real peak in house prices. Typically, after a sharp increase in prices, it takes a number of years for real prices to reach new highs (see House Prices: 7 Years in Purgatory ). There is nothing magic about “7 years”, it just made a good headline! My initial guess on house prices was “mostly flat to a small decline in prices nationally in 2026”. With inventory picking up a little and higher mortgage rates (less demand), it appears nominal prices will be mostly flat this year. And it appears real prices will decline further in 2026. In real terms, national house prices are 8.5% above the bubble peak levels. There is an upward slope to real house prices, and it has been over 20+ years since the bubble peak, but real prices are historically high. Price-to-Rent Ratio The following content is for paid subscribers only. Thanks to all paid subscribers! CalculatedRisk Newsletter is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.
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