Housing Bubble Charts!-Updated

Here is a nice collection of charts based on Robert Shiller’s data. First, the really long term:

For those who haven’t been here before the housing category and tag has lots more on the bubble. My thoughts on the latest data, and that in reality this is long term a good thing, can be found here. A key point to remember is that every bubble, regardless of the asset, not only has corrected, but generally over shoots. This implies a long way to go, and for several more years before inflation adjusted prices actually rise.

Here is one of more recent years:

Thus, if history is a guide, we should see an inflation adjusted fall in prices of about 35% lower than here, or at least 25% in nominal terms.

You can find charts for individual metro areas as well by going here.

Hat tip: Les Jones via Instapundit

UPDATE: Over at Les Jones place a commenter asked for the price relative to income. Ask and you will receive. Thanks to Calculated Risk I have a number of charts with various ways to plot the price of housing. As a note the Case Shiller index adjusts for changes in the size of houses over time (each chart can be clicked for a larger version.) Here is the price to income chart:

Using this metric a combination of rising incomes and/or falling prices are needed to close this gap of about 15%. That assumes no overshoot, and of course in a recession incomes tend to not rise much.

Another useful way to look at it is the price to rent ratio.

By this measure about another 20% to go. Here are three of the hardest hit areas:

By this measure Miami has gone about 80% of the way to the eventual bottom, Los Angeles about 65%, and New York just over 40%.

Here is the fall from the peak for all 20 metro areas covered by the Case-Shiller index:

How is this likely to impact consumption? Here is a frightening graph which bodes poorly for the shift in spending (or positively since we need to save more over the long term.)

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Tags: Case-Shiller, charts, housing, housing data, Housing Market, Robert Shiller

This entry was posted on November 26, 2008 at 11:06 pm and is filed under Data Bank, Features, The View From the Bluff. You can follow any responses to this entry through the RSS 2.0 feed.