Home Prices Adjusted for Inflation

sept 2013 real

 

The chart compares the S&P/Case-Shiller 10-City Index with and without adjusting for inflation.  In real or inflation adjusted terms (the red line) the recent boom and bust looks more modest while the previous run-up around 1987-1990 is a bit larger.  The current inflation rate is under 2% and isn’t likely to affect anyone’s short term thinking about buying or selling a house. However, over the longer term — including the typical period one expects to own a house — inflation can make a difference.  Even 2% inflation can trim the value by more than a fifth in ten years.

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