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3 Comments
Thank you for this information. As a potential first homeowner in Miami, I find your data to be very resourceful. Keep up the good work!
Another interesting measure of home prices is the average cost per square foot adjusted for inflation. I believe – from what source I do not remember – that $400/sf is the historical norm after adjusting for inflation. Is that true? How far over that norm did prices get in 2006? What is the measure now?
You are correct that some analysts use dollars per square foot as a measure of house values. However, there are some difficulties since the figure will vary depending on the size of the house and is sometimes more dependent on construction costs and architectural styles than on the market value of the house and the land it is on. I don’t know of a widely used source of house values as dollars per square foot.
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[...] In a post for Standard & Poor’s Housing Views blog, David Blitzer, chairman of the index committee at S&P Indices, writes that an analysis of the most recent Case-Shiller price index and data from the Census Bureau shows that the rent:buy ratio has returned to its long-term average after many years when buying was far more expensive than renting. Blitzer writes that during the 1990s renting was more costly than buying a home, then surging prices during the housing boom made buying more expensive. Since the post-boom drop in values, however, the ratio has returned to normal. Comparisons of home prices to per capita disposable income also show a return to long-term averages. According to Blitzer, the data means that prices seen during the peak of the housing bubble were not normal and that homebuyers shouldn’t expect a return to the volatility seen over the past decade. More here. [...]
[...] In a post for Standard & Poor’s Housing Views blog, David Blitzer, chairman of the index committee at S&P Indices, writes that an analysis of the most recent Case-Shiller price index and data from the Census Bureau shows that the rent:buy ratio has returned to its long-term average after many years when buying was far more expensive than renting. Blitzer writes that during the 1990s renting was more costly than buying a home, then surging prices during the housing boom made buying more expensive. Since the post-boom drop in values, however, the ratio has returned to normal. Comparisons of home prices to per capita disposable income also show a return to long-term averages. According to Blitzer, the data means that prices seen during the peak of the housing bubble were not normal and that homebuyers shouldn’t expect a return to the volatility seen over the past decade. More here. [...]
[...] In a post for Standard & Poor’s Housing Views blog, David Blitzer, chairman of the index committee at S&P Indices, writes that an analysis of the most recent Case-Shiller price index and data from the Census Bureau shows that the rent:buy ratio has returned to its long-term average after many years when buying was far more expensive than renting. Blitzer writes that during the 1990s renting was more costly than buying a home, then surging prices during the housing boom made buying more expensive. Since the post-boom drop in values, however, the ratio has returned to normal. Comparisons of home prices to per capita disposable income also show a return to long-term averages. According to Blitzer, the data means that prices seen during the peak of the housing bubble were not normal and that homebuyers shouldn’t expect a return to the volatility seen over the past decade. More here. [...]
[...] In a post for Standard & Poor’s Housing Views blog, David Blitzer, chairman of the index committee at S&P Indices, writes that an analysis of the most recent Case-Shiller price index and data from the Census Bureau shows that the rent:buy ratio has returned to its long-term average after many years when buying was far more expensive than renting. Blitzer writes that during the 1990s renting was more costly than buying a home, then surging prices during the housing boom made buying more expensive. Since the post-boom drop in values, however, the ratio has returned to normal. Comparisons of home prices to per capita disposable income also show a return to long-term averages. According to Blitzer, the data means that prices seen during the peak of the housing bubble were not normal and that homebuyers shouldn’t expect a return to the volatility seen over the past decade. More here. [...]
[...] In a post for Standard & Poor’s Housing Views blog, David Blitzer, chairman of the index committee at S&P Indices, writes that an analysis of the most recent Case-Shiller price index and data from the Census Bureau shows that the rent:buy ratio has returned to its long-term average after many years when buying was far more expensive than renting. Blitzer writes that during the 1990s renting was more costly than buying a home, then surging prices during the housing boom made buying more expensive. Since the post-boom drop in values, however, the ratio has returned to normal. Comparisons of home prices to per capita disposable income also show a return to long-term averages. According to Blitzer, the data means that prices seen during the peak of the housing bubble were not normal and that homebuyers shouldn’t expect a return to the volatility seen over the past decade. More here. [...]
Rent vs. Buy, Inflation-Adjusted Prices
The latest S&P/Case-Shiller Home Prices, combined with the home-owners rental equivalence index from the Census Bureau’s CPI report, shows that renting vs. buying is roughly in balance. The first chart compares the rent:buy ratio with its average since 1987. In the 1990s renting was relatively expensive while during the housing boom-bust buying a home was much more costly. Since home prices collapsed and have remained in a narrow range in the last year or two, the rent:buy ratio came back to its average. Another long-term measure of home value is the ratio of home prices to per capita disposable income, as seen in the second chart. When home prices surged in the early 2000s, the ratio of home prices to income climbed sharply Since the bust these are also back down to the long term average. Unlike the rent:buy ratio, the most recent data shows deterioration of this measure below the average since 1987. This may reflect concerns that median incomes are flat to lower in the last decade.
Renting vs Owning
Price:Income Ratio
A related measure is the real or inflation-adjusted price of homes shown on the third chart. During period of rapid inflation many people look to real estate holdings for inflation protection. Fortunately we have not suffered rapid inflation since the 1970s and early 1980s so inflation fears are not spurring home buying. The overall price pattern is the same for inflation-adjusted and nominal home prices.
Real and Nominal Home Price Trends
All these measures do carry at least one important reminder for home owners, home buyers and renters: the prices seen in 2006 and the middle of the last decade were not normal. Someone buying a home today who expects prices to jump 20%, 30% or more overnight to back to levels of 2006 is likely to be disappointed. Someone who bought a house at the peak seen a few years ago is already disappointed.