Home value chart updated 1890-2011


Barry Ritholtz of The Big Picture says:

In 2006, just as the Housing market was peaking, the NYT ran this graphic of the 100-year Case Shiller chart. It showed how radically overvalued Housing had become. Two years later, TBP reader Steve Barry updated that graphic, including the projected Home Price mean reversion. Its time to update this for 2011. Note the 2009 tax credit wiggle.
Case Shiller 100 Year Chart (2011 Update)


    1. Bubba started getting rich in the tech boom. Fuel was at historic lows and inflation was low and stable.

    2. One thing that happened in 1997 was that the GDP of China (and on a lesser scale, India) started to skyrocket, leading to increased demand for investment vehicles. This translated into demand for homes, as pressure to create mortgage-backed securities was such that borrowers who never would have been offered loans before were sold them aggressively.

    3. what happened in 1997?
      the capital gains tax for home equity was changed, and banks could operate across state lines and ‘write’ mortgage bundles.

      the tax law was sort of like saying “if you sell your home the government will give you as much as $150k back!”. Then, surprisingly… a lot of people sold their homes and banks were there with brand new checkbooks to write loans for the massive increase in transactions. Clinton (greenspan) took out glassStegal and wrote the ‘tax payer relief’ act of 1997.

      The final straw was 9/11s reaction to move interest rates to 1% (greenspan).

  1. Looking at the house prices around me in the Puget Sound area, I gotta call bs. Sure, you can find a house of useful size for a useful cost, if you don’t mind a driving commute of over an hour each way – and that’s assuming your job is flexible enough to let you commute at very odd times. Otherwise, you’re looking at a junker from the 50’s for a few hundred thousand, minimum.

    1. Yep. Same thing in Los Angeles and Orange Country only a year ago when we were looking..

      It took us 6 cities, 2 counties, and over 90 houses to get anything close to our range that wasn’t a beat to crap place or one that literally wasn’t a 1 1/2 hour one-way commute.

      Every time we would find something a group of investors would pay it FULL IN CASH. Pissed us off to no end.

    2. Do you really expect to buy a restored 3 bedroom victorian in the Freemont/Ballard/Queen Anne/etc neighborhoods for $250? Just because you can’t afford it doesn’t mean many in Seattle can’t and aren’t willing to pay the premium.

      One of the many issues with this chart is it takes a nationwide look. The magnitude of the housing bubble was very location dependent. Other charts and graphs show that most areas have leveled out to a more historically normal amount. Chart and graphs, charts and graphs… Frankly this chart doesn’t pass the smell test from around the block.

      1. “One of the many issues with this chart is it takes a nationwide look.”

        Actually, that’s kinda my point. The news says “look, housing is affordable again”, but I look around me and see that local prices are still strongly bubbled. Hell, I’d be surprised to find a *1* bedroom home of any vintage in those areas for $250k. I look around and think “damn, maybe I *should* move back to Texas. At least then I could afford a house with a garden.”

        Two years ago, a friend of mine back in Texas bought a very nice 5 year old 3-bedroom house with a large yard in The Woodlands (not really a cheap place by TX standards) for ~$120k.

        1. But Woodlands is a two hour commute into Downtown Houston on the best of traffic days, which was your original complaint. A one bedroom house in the Montrose area is going to be comparable in cost to one in Ballard, apples to apples.

        2. Also, they you’d have to live in Houston. Not that there’s anything wrong with being H-Town proud, but yeah. :P

    3. Otherwise, you’re looking at a junker from the 50’s for a few hundred thousand, minimum.

      In the 50’s, lots of people lived in 50’s houses, except the people who couldn’t afford them, in which case they probably lived in junkers from the 20’s.

      Personally, I think the main driver of the housing bubble was greed all around, like the fact that we’re all now too good to live in the houses our parents lived in.

  2. I really hate misleading graphs. The zero point on the y axis is 60$ dollars. Over a quarter of the chart is missing. This makes the jumps and falls seem larger than they really are.

    You’d think a Yale economist wouldn’t skew his data like that. Then again…

    ~D. Walker

    1. Actually Anon the baseline for this graph is $100,000. That is the adjusted value of a home for sale the first year the chart covers. This is a chart of the rise and fall in value based on that starting point. When it says $60,000 it actually means -40%.

      1. Anon #15, that doesn’t actually change the y axis issue. It still makes -40% look like nearly 0. It makes the jumps and dips seem bigger than they actually are in relation to the overall value of a “standard house”.

  3. I hate how financial charts always have the y-axis set to the low range of values, instead of zero. It seems like it promotes a false sense of volatility: that chart makes it look like adjusted home values dropped to being nearly worthless in the depression, instead of of roughly a third of what they were at the peak of our most recent bubble. (Don’t get me wrong though, that is still a serious bubble and crash shown there)

    It is the standard way to look at stock graphs too, only at the maxes and mins, obfuscating the overall value of something. It seems to me it would result in chasing what amounts to what amounts to no more than random noise in the financial system system. A mechanism for causing systematic aphrophenia among investors?

  4. Soooo, what you’re saying is, I shoulda bought a house at the beginning of the Great Depression? Damn!

  5. Setting aside vagaries of pricing due to location and relative length/strength of the housing bubble in your area, how many people feel their home is as well built as their parents’ or grandparents’ homes. Growing up, my grandparents’ 40+ year old home seemed to be much better quality than my own -20 year old home. Of course, Texas has no housing quality protections for homebuyers and the regulatory commission we did have was so corrupt our Legislature killed it. Still,how far are we willing to allow the decline in quality of manufacturing, construction, education, statesmanship, etc. proceed?

    1. My current house was built in 1961, so it’s the same age as my parents’ and grandparents’ houses were. My current house was cheaply built in 1961; my parents built a brand new house in 1997. I would say that overall craftsmanship is the same or possibly slightly better in my current house than their new one. Excepting electric and plumbing. As a system, my house performs better. There are some very thoughtless aspects to their house.

      Our old house has hardwoods throughout. They were underneath ratty 20 year old carpet, and needed to be refinished. That’s one nice thing about older houses. Our house is on a .45 acre lot, which is pretty standard in this older neighborhood. It seems like most new construction is on .17 acre lots. We got a good deal on this house because it’s a down economy, and the majority of buyers seem to equate “newer” and “better.”

      Although huge by international standards, I think a lot of new home buyers would find our house too small for a family of four. We always look at older houses when we’re in the market. I’m just not a fan of the brick-facade, vinyl-on-three-sides, 2-car-garage-forward spec house, with its toxic carpet and toxic drywall. I’ll stick with my hopefully-encapsulated-asbestos-and-lead-paint, my galvanized drain pipes, and my ungrounded receptacles.

    2. Yes, but that’s partly due to survivor bias. They built plenty of cr@ppy housing 100 years ago, shotgun shacks, tenements, sharecropper housing etc. Very little of that is still around. On the one hand modern construction techniques optimize the minimum use of poor grade wood. 1.5″x 3.5″ rapid growth softwoods with a little bit of OSB on the corners. OTOH, well designed roof trusses ARE stronger than traditiona attics, modern pre-installed wiring beats 100 years of randomly added outlets, insulation standards are much better etc.

      In my opinion, the modern crop of McMansions is unlikely to stand the test of time as well as those big old Victorians. But if you’ve ever tried to heat, or run electrical equipment in those old victorians, you’d see that they aren’t without disadvantages either.

  6. What happened in 1998 is that the US Congress let the foxes into the henhouse.

    Three-card-monte mortgages … who wudda thought.

  7. That chart is pretty accurate for Palm Springs. Houses are selling for a bit more than they sold for in 2000. You could say, “I bought a house for $200K in 2000 and now it’s worth $250K.” But oddly, nobody describes it that way. Instead, it’s, “I bought a house for $200K in 2000 and IT WAS WORTH $600K IN 2005 AND NOW IT’S WORTH $250K!” Real estate is a glass-half-full business on one end of the deal and a glass-half-empty business on the other end.

  8. “how many people feel their home is as well built as their parents’ or grandparents’ homes.”

    IANABI (I am not a building inspector), but the home I grew up in was built in 1927 and was solid. The one I’m in now was built in 2005 and seems pretty good. But I now live in the San Fernando Valley, where there are virtually no pre-WWII homes, and the vast majority were built on the cheap in the 20 years following the war. The houses were built on the cheap then, many haven’t been maintained well, and now they’re cheap and old.

  9. Am I utterly pedantic if I note that this graph shows the inflation corrected price of a house and not the intrinsic value of a home?

    One day marketing euphemisms will rot our brains to the point where people can’t think straight. This may already have happened.

    1. I’m going to double down on the pedantry by pointing out that the intrinsic value of a home stays constant. All humans need one equally. (Though I suppose it varies by climate and culture.)

  10. …and this is why even though I could afford it, I don’t own a house. It is an extremely illiquid asset that just noms money in wear and tear, taxes, and interest. It staples your feet to the ground, and it requires you to go into gobs of debt hoping like hell that price of your asset doesn’t change drastically because if it does, you are hosed.

    If you are buying a house because you want to live in the same place forever, it is probably a good idea. If you are buying it because you think it is an “investment”, you are a moron. After wear and tear, interest on your mortgage, and taxes, it is a bland investment during the good times, and a lead anchor during the worst.

    People are far too eager to buy. If you are a single person or a DINK, unless you live in some place where houses are extremely cheap, there is a non-trivial chances you are screwing yourself if you buy a house. Get a nice apartment in some fun city and enjoy life a little. Commuting 1.5 hours each day so that you can mow a law is really not as exciting as you imagine it is, especially when the economy tanks and you go under water on your loans.

  11. I remember being intimidated by rising house prices when all my peers were buying 2001-02. Things were completely out of hand and it would have been wildly dangerous to buy in 2005. Today, I still feel like the bubble has not deflated enough to warrant entry into the market, especially given how terrible the economy is. I am currently renting a house at about 60% the mortgage value I would be paying had I bought it even last year.

  12. This chart doesn’t originate from Barry Ritholtz, but from a contributor and blog commenter named Steve Barry. Steve Barry has a deflationary outlook, at least he did about a year, or so, ago, when he stopped making comments on Barry’s blog.

    Steve Barry made, what I thought, was a compelling case that ultimately, house prices across the country were eventually going to revert to mean, as would stock prices (maybe after dipping far below mean). At least, that was my interpretation of Steve Barry’s comments. I could be mistaken in that interpretation.

    The Fed’s continuing pumping has, so far, not allowed a deflationary spiral, hence, the reversion to mean has not been allowed. This may or may not continue. Who knows?

    Anyway, this chart reflects the thinking of one of Barry Ritholtz’s blog contributors and commenters, not Barry Ritholtz. He may think it’s prescient. I don’t know. It’s pretty hard to figure out, day to day, what B.R. thinks is likely.

    This chart includes home prices during different currency regimes, prior to 1971 (dollar-gold standard) and after 1971 (dollar-exchange floating), so it might be impracticable to compare current home prices to historical prices.

    For what it’s worth, I was banned from commenting on B.R.’s site in the fall of 2008 because I referred to the bailout as both Fascist and corporatist. So, maybe I’m not such a reliable source of information, or maybe I am, depending…

  13. Personal anecdote: Born 1974 in the SF Bay Area, lived there until I was 33. Housing was something that literally anyone with a steady job could afford up until the mid 1990’s (as implied by the Schiller graph). Grew up thinking I would buy a house after undergrad, live somewhere near where I grew up. The new reality struck when, even with a steady job and large nest egg, I was priced out of the market twice, in 1999 and then again in 2005. Cursed with the ability to do math, I realized that none of the “deals” the banks were offering made any sense e.g. no interest, ARMs, etc.

    In 2004 my unfortunate colleague bought with an ARM a small two bedroom house in the exurbs (Crockett, CA) which featured severe dry-rot, bad plumbing, Edison wiring, lead paint (requiring abatement), iffy foundation, crappy roof and an entrenched tenant in a garage outbuilding. He paid $500,000 and considered himself lucky. This morning’s Zillow comps estimate for his neighborhood: $200,000.

    Sad story bro.

    Anyone who says that the housing market has bottomed out is seriously out-of-touch. Inflation adjusted wages are stagnant, no matter the ridiculous price stickyness of real estate.

  14. Who the fuck builds houses out of wood?

    Houses are built out of bricks. Or reinforced concrete. I mean, at least here in Europe, new houses, it’s usually a foot thick brick walls that ends up insulated with several inches worth of that glass fiber stuff I can’t translate.

    You end up with a house that doesn’t need A/C even in faily 100 F temperatures, provided you can get cool air inside during the night.

    1. A German 88mm will pass right through a wood-frame house and explode elsewhere. I have seen what they do to your foot-thick (that’s 30 cm, isn’t it?) masonry. Let me advise you not to stand in the street when those roof tiles come off. We’ll never learn; neither will you. It’s only a question of what is not learned.

      Diligence: two of my buildings are of masonry, and I own an armored vehicle.

    2. Houses are built out of bricks.

      Only if you want them to collapse in an earthquake. Wood houses withstand earthquakes fine.

      Don’t assume that whatever happens to be the vernacular in your area is universal.

  15. @anon #29
    Shotgun houses built 100 years ago were solidly built, in my city, and were not shacks by any means. My hometown has one of the largest remaining stocks of shotgun houses, and they are becoming once again the starter home of choice for younger couples and singles.

  16. @Antinous

    Deforested? Speak for yourself. The country I was born in has about 45% of it’s land covered by forests. True, it’s a far cry from 95+% we had during the last interglacial age, but it’s not bad.

    Until we get this agriculture nonsense dealt it, we can’t have plant forests back anyway.

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