Updated Case-Shiller 100 Year Real Estate Chart

I’ve posted this chart before and it continues to fascinate me. This time The Big Picture has updated it to show what a decline to “fair value” might mean for prices. You might and probably could quibble with where prices end up but there is a fair case to be made for their projections for further declines.

I think what I like so much about the chart is that you can look at it from so many different angles. What was going on with interest rates at such and such a time? How did demographic changes affect prices? How about inflationary expectations or the general level of economic activity?

Actually, I do have a life but like you I also have my quirks. Anyway, let me know your take on the update.

click to enlarge

Comments

[J. Crighton]

Someone should turn this into a spreadsheet where you can input how much and when you paid for your house to find out where it would fit into the above chart.

Just a thought.

2009 Jul 05 12:39 PM

[Market Sniper]

Absolutely fascinaing chart. On an infltion adjusted basis, seems the high in the 1890's was not surpassed until the recent run-up. In absolute dollar amounts, the previous high of a long term secular real estate bull market as in 1924, a price not again hit until 1958. Another interesting note. Even the 2005 high IF you were in Euros was unchanged from 1998! Guess it is all a matter of perspective!

2009 Jul 05 02:01 PM

[F. Bradeen]

Now mind you, I have never been a fan of real estate, but anybody, including Schiller who I do respect, tells me housing prices went sideways from 1945 to 1995 has to be looking at the data in a funny fashion or smoking some funny stuff to say the least.

2009 Jul 05 04:16 PM

[Market Sniper]

Those are inflation adjusted prices. The chart utilizes constant dollars. Values in nominal dollars of course increased as the purchasing power of the dllar dropped. Again, if you had been in euros, the real estate median price in 1998 was the same a in 2005-2006!


On Jul 05 04:16 PM F. Bradeen wrote:

> Now mind you, I have never been a fan of real estate, but anybody,
> including Schiller who I do respect, tells me housing prices went
> sideways from 1945 to 1995 has to be looking at the data in a funny
> fashion or smoking some funny stuff to say the least.

2009 Jul 05 04:30 PM

[Mark54]

Even more disturbing fact is that most investors did not see this coming. A eerie chart.

2009 Jul 05 09:57 PM

[Robert Gosney]

Home prices will never be back to 1890 levels. They may not ever even be back to 1990 levels. Building policies have become infinitely more restrictive. Example: When I started building in 1986 permit fees were about $3.50 per square foot. Now (same locale) fees are around $22.00 per square foot. Building codes are more stringent, commodities higher, and the cost of meeting energy standards has gone up exponentially.

2009 Jul 05 10:00 PM

[Zircon - 212]

Thanks for the chart. The dotted red-line projection is about as useful as an ashtray on a motorcycle given that nobody can predict the future.

2009 Jul 06 09:13 AM

[nobull]

Thanks for the chart. Someone should mail this to the NAR and their so-called ahem "economist".
For those doubting the projection, look at other peaks - things always revert to their mean.

2009 Jul 06 09:43 AM

[islandcreek]

Seems to me that what this chart actually shows is that residential real estate roughly does keep up with inflation over a lifetime. Am I looking at it wrong?

2009 Jul 06 12:17 PM

[realold]

And, in built-out areas, there is no land available upon which to build. If you do find a lot,it may take up to 2 years for studies,plans and permits. When you are done, the local government has reserved 2/3 of your lot for a nature path, etc. etc. Hence, one would think that if population grows at all, populated area homes will rebound to some level. Sierra club, et al, will not let you build in unpopulated areas and costs to move goods will make it more costly to populate these areas. Only a return to people oriented (rather than critter centric) thinking where land is opened up for public auction and highways and infrastructure built with tax money instead of going to welfare (education of the non-educatable), will bring the price of anything down for very long.


On Jul 05 10:00 PM Robert Gosney wrote:

> Home prices will never be back to 1890 levels. They may not ever
> even be back to 1990 levels. Building policies have become infinitely
> more restrictive. Example: When I started building in 1986 permit
> fees were about $3.50 per square foot. Now (same locale) fees are
> around $22.00 per square foot. Building codes are more stringent,
> commodities higher, and the cost of meeting energy standards has
> gone up exponentially.

2009 Jul 06 01:02 PM

[Radardoc]

Nice shot there Zircon, but if you read the authors words:

"This time The Big Picture has updated it to show what a decline to “fair value” MIGHT mean for prices. (emphasis added)

He clearly states it is speculation. This speculation is every bit as valid, and probably closer to the truth than the NAR and "green shoots" stuff I've seen...


On Jul 06 09:13 AM Zircon - 212 wrote:

Thanks for the chart. The dotted red-line projection is about as
useful as an ashtray on a motorcycle given that nobody can predict the future.

2009 Jul 06 01:07 PM

[Zircon - 212]

Projection implies prediction and sadly the general public often takes it as gospel. Throwing in a 'might' is a lame way of hedging your projection may prove to be inaccurate and save face if that is the case. It might be sunny tomorrow or then it might not. Having said that I still find the chart fascinating despite the dotted red line.

2009 Jul 06 02:00 PM

[Fromhere]

Interesting chart, but like all statistics, it is only a reliable as the underlying data. I would really like to see this chart updated using the shadow stats version of inflation as originally reported by the Feds back to 1980. I wonder how much of the recent spike is from under reported inflation (since that is the divisor) versus an increased real price. Also, is this a national average, median, mean? All real estate is local (e.g. Detroit vs. Phoenix) and there were not many suburbs in 1890, so what is really being measured?

2009 Jul 06 03:53 PM

[jeandit75]

Like I often mentioned, stocks ereased 10 years of history so why not housing prices. There is still a LOT of downside before things CAN improve.

2009 Jul 06 04:48 PM

[Brian Bober]

The green shooters appear to now live in a second derivative glass castle and can soon be expected to promote specific housing markets and anecdotal evidence. Here in Texas (specifically Austin and Dallas) many neighborhoods have never declined and a few are still up yoy.

I'd really like to see this chart broken into industry / demographic / regional markets such as the coasts, New York financial area, Texas, auto market (Michigan, Ohio, Illinois minus Chicago), Bible-belt, etc.

I'd guess this chart dives through 100, not bounces off it.

2009 Jul 06 06:18 PM

[Northstar10000]

Nobody can predict the future but an ash tray on a bike gets the same odds as housing prices in the future get in Vagas. Those boys know how to predict the future and the gaming tables prove it. You can see where housing prices are going without a chart. Care to bet that bike?

2009 Jul 06 09:18 PM

[Observor]

I think this chart proved that real estate was a good asset to preserve value against inflation in long run. Regardless what caused the big spike in recent years and how it will bust, it indicates that future value will be trend up. This is just a natural phenomenon. Although I do not know why, but simply consider it might be a reveres process to the resource decline phenomena. Based on the chart, it is going be very difficult to bring the house value below 110 anymore, unless the entire country collapse, which could be happened such as Roma Empire, but I do not think so.

2009 Jul 06 09:45 PM

[Observor]

I think this chart proved that real estate was a good asset to preserve value against inflation in long run. Regardless what caused the big spike in recent years and how it will bust, it indicates that future value will be trend up. This is just a natural phenomenon. Although I do not know why, but simply consider it might be a reveres process to the resource decline phenomena. Based on the chart, it is going be very difficult to bring the house value below 110 anymore, unless the entire country collapse, which could be happened such as Roma Empire, but I do not think so.

2009 Jul 06 09:51 PM

[Panicstations]

Maybe this chart is predicting hyper-inflation as much as a fall in house prices.

2009 Jul 10 10:02 AM