100 years of housing prices

Sometimes a picture has more than a thousand words, though only three are coming to mind right now…


The Yale economist Robert J. Shiller created an index of American housing prices going back to 1890. It is based on sale prices of standard existing houses, not new construction, to track the value of housing as an investment over time. It presents housing values in consistent terms over 116 years, factoring out the effects of inflation.

HFS indeed. That last bar covers the past ten years. Suddenly, I don’t feel bad at all about not owning a house, being in the market for a house, or worrying about a mortgage. That economic hard landing that economists are kicking around looks more and more like a mid-air explosion followed by a smoking crater in the ground.

Welcome to 2007, hope you survive.

10 thoughts on “100 years of housing prices

  1. Hi Chris,

    I read the same article the other day but I am not entirely sure that I draw the same conclusions from it. Of course I have other ominous conclusions, or at least conjectures. Do you think it is possible that this run up has been caused, at least in part, by the enormous overall surge in population? It astonishes me that nobody thinks it odd that in the 22 years or so since we left Webb, the United States has added 55 million people or more. And most of this growth is suburban and exurban. More and more people chasing less and less house. This is one of the ways in which the third-worldification of the US manifests itself–an increasingly inadequate overall infrastracture. Look at the UC system–they have added exactly one campus in the past 30 years while the population has almost doubled. I would also bet that despite the expansion of the main nine campuses, proportionally there are fewer UC slots in relation to the the population. I rode Amtrak down from Union Station to San Diego the other day and the interior of the car, and the service, reminded me of the description in Warday.

    Getting back to houses–nobody is fucked who bought his house using the more traditional, appropriate mortgage-qualification criteria the banks and others chucked out the window some time ago. In other words, if you buy a house you can truly afford, even at an inflated price, you are not going to be hit that bad. In the past, according to an investment-guru friend of mine, banks would count only the larger of two incomes in a two-income household–but feminists put the kibosh on that. Sound budgeting also dictates putting no less than 15, preferably 20%, down. The inflated prices of course made all this difficult, then it became a self-fulfilling spiral: people bought more and more houses they truly could not afford, artificially pumping up “demand”, thus driving prices up further and making ramshackle financial arrangments ever-more necessary.


    Am back in S.D. and will be coming through LA by vehicle in about 8 to 10 days. Any chance we can meet?


  2. If you were reasonable and bought a home you could afford, and didn’t use all that phantom equity money to buy yourself another two cars and a boat and stuff you didn’t need and couldn’t otherwise afford, you’ll probably be okay. If, however, you bought the most you could afford (or couldn’t actually afford without interest-only loans and balloon payments and all the other “looks great today, gonna suck in five years” sorts of gimmick mortgages the market got flooded with starting around the 90s), then I’m not going to be as optimistic.

    Gonna be an interesting next couple of years, that’s for sure.

  3. I’m not quite ready to play blame-the-victim just yet, but I’ll easily wag fingers at the entire real estate/construction/financing subculture that convinced folks that housing was an investment asset like bonds or equities rather than as something of basic intrinsic value: the place where you lived.

    I’m bothered because the ripple effects from the cratering are going to shaft everyone, not just the house flippers and over-extenders who bought into the Livin’ Large feedback loop.

  4. As with everything, “it depends.” The worst off will be folks with an adjustable rate or negative amortized loans, especially if they already have a pretty high debt load, little/no savings, and live in the exurbs. The Big Picture gets scary when you sum in all the other data points that are on the march: energy costs, transportation costs, increase in property taxes, etc. etc.

  5. If one looks at this chart at face value…. the current ‘boom’ cannot be sustained. The difference between homes sold prior to the 1980’s, is that they were NOT considered investment vehicles for making money … they were considered investments in oneself – one’s home is one’s castle, and they were bought with people expecting to die of old age in their ‘castles.’ After the 1980’s, homes started to become more and more of a ‘short term’ money-making investment. Buy the house … live in it for 3-5 years, flip it over and buy something else. This has created the volatile up and down market trends you see depicted on this chart in the last 25 years. If the trend continued at it’s current rate, within 15 years this ‘average’ house, would topple $800,000. Does anyone think that in 15 years, the average middle-class American citizen will be able to afford that? Keep in mind, India and China are looming on the horizon for up-and coming competition of all those middle-class Americans.

  6. Can u give me the price and year of the info in a chart or something, a graph doesn’t help me. I’m doing this for a project in Math.

  7. I too am a math teacher and I teach remedial math to college students. I could use this information in a chart or table to create a final project for my students. I have to teach proportions and percents to my students and I may as well teach them something useful for their lives. If not, thank you anyway, I’ll figure it out.

  8. Instead of pulling all the supposed equity out of our house during that time, my husband and I drove our old cars, paid off our mortgage and now own our house free and clear. We are big believers in the old saying, “If it looks too good to be true it is too god to be true.” Also, if one looks back at history, one of the driving causes of the depression in the thirties was the overinflated prices of farmland and people living the high life during the twenties. Those who do not learn from history are doomed to repeat it. So, when a student asks, how is this relevant to me, we have a modern day experience to draw from and answer the question.

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