The Speculative Bubble Blog uses the stats derived by Robert Shiller which we covered here back in September. (Hat tip to True Gotham) Shiller trends the housing market for 116 years adjusted for inflation.
While this chart is pretty scary looking (duh!), its based on the sales price of “standard existing houses, not new construction” and doesn’t include condos or factor in foreclosures.
I was always taught that you need to plot at least two data points on a chart to make a point, so I’d love to see this index matched against personal income, housing costs as a percentage of personal income or some relationship to leverage to get something constructive out of data series.
Still it makes good fodder for a railroad software game – a very creative application of housing stats – take a ride:
Tags: Robert Shiller
There are two data points. The (1) prices are adjusted for (2) inflation. And I’m not sure any of us would like to see personal income plotted on top of this because I can assure you that it has not kept pace. Debt would be a more interesting plot line, IMO.
No – I strongly disagree. The adjusted home prices need to be matched against something that relates to affordability. I’d like to see wages (adjusted for inflation) other than saying “wow, thats a really, really steep climb.” Thats pretty obvious, but how does it relate to how people are doing? If you plotted personal income as an index and it showed a wider spread, or perhaps housing costs as a percentage of income (my preference), then this would be informative.
Johnathan, Your the chart man why don’t you make one showing wages and home prices?
I wish I could. Since, I’m not in academia, so I don’t have an army of grad students to dig up the data!
How’s this? http://en.wikipedia.org/wiki/Image:Household_income_65_to_05.png
Doesn’t look like correlation to me, but I also do not have raw data or grad students. Certainly no gigantic spike and, in fact, shows a significant decline right around 1998. This is roughly the same time housing went through the roof.
I submitted a link to a graph but it’s stuck in moderation (probably due to said link)…
Here’s one that plots all of the above. Real home prices relative to real income (same chart) and household debt on a separate chart. From 2004.
Or how about relative to real rents? http://seekingalpha.com/wp-content/seekingalpha/images/real_home_vs_rent_prices_01.png