Wednesday, March 30, 2016

Housing: Part 131 - The Shiller Real Home Price Index in the Two Americas (Updated)

A while back, when I first started thinking through the implications of the localized supply constraints that now are at the center of my story, I posted this graph of the Shiller Real Home Price Index.  Dr. Shiller discounts that index with CPI inflation.  The idea, I believe, is that over the long term, rent inflation should basically follow general inflation.  In theory, this makes sense.  And, empirically, it was pretty close to the truth except for some unusual rent inflation in the 1970s.  But, since Shiller has developed these tools, we have now had a 20 year period of time with persistently high rent inflation.

Now, if we are trying to decide if home prices are reasonable, it seems to me that, whatever our theory of expected rent inflation, if we have a rent inflation measure, that is the discount rate we should use on a Real Home Price Index.

So, on my first go around with this, I posted this first version of the graph, with my correction.

As you can see, this tames that scary looking monster of a graph quite a bit.  We aren't so much overpaying for homes as we are paying higher rents for them.  The difference between my graph and his graph is basically a measure of the transfer of wealth we have made to real estate owners in Closed Access cities.  About 1/3 of the value of our residential real estate was just a winning lottery ticket for people who happened to own property in places where policy makers became more dysfunctional during their tenure.

But, even my version had a sizable hump in 2005.

Now that I tend to think of these things more locally, it occurred to me that this measure really should be local.  A few cities have Case-Shiller home price indexes and CPI Owner Equivalent Rent measures that go back at least far enough to capture the housing boom period.

Here, I have added three cities to the graph: San Francisco, Dallas, and Atlanta.


For 3/4 of the country, irrational or unsustainable prices should not, and never should have been, part what buyers are concerned about if they are deciding to buy a home.  It is simply not relevant.  Dallas and Atlanta and a hundred other cities have never even remotely moved out of the long term range of home prices.  There is nothing to see here.

And, San Francisco isn't hitting the top of the chart because of irrational buyers.  It's hitting the top of the chart because there is no end in sight to its dysfunctional housing market.  Rents will keep rising until it is fixed.  The reason a buyer has to pay so much for a home in San Francisco today is because they have to assume that rents 10 or 15 years from now will be double what they are today.  The market failure would be a market where Price/Rent in San Francisco was not any higher than in Dallas.

Buyers in San Francisco aren't banking on the irrationality of the housing market.  They are banking on the irrationality of San Francisco housing policy.  They really have no choice.  The San Francisco Board of Supervisors forces real estate owners there to be wild speculators on the autocratic tendencies of the San Francisco electorate.  The Supervisors really have no choice either.  You get elected in San Francisco for referring to those beautiful, easy Dallas and Atlanta price trends as "trickle down economics".  In San Francisco, you get elected by showing concern for high rents, not for solving them.  75% of the country knows how to avoid rising rents.  It must not be that difficult.  It's just not how to get elected in San Francisco.

Meanwhile, Robert Shiller, the great economist who has made these wonderful tools available to us, has spent the last 15 years warning people in Dallas and Atlanta about bubbles.  And people post pictures of his scary blue line to explain how out of control markets are.

PS:  By the way, do you notice that really long period of stability in home prices before the 1970s?  Do you think we got that through macroprudential management?  Through tight controls on home building?
No.  We got it by building and lending.  There was consistent growth in mortgages as the New Deal housing policies were implemented.  California was growing by 3-5% per year, and real private fixed investment was growing by 5-7% per year.  You want stability?  Let's try that again.  (Ironically, lenient lending and building policies would lead to declining mortgage levels because real estate values would fall.  Open access is the sustainable policy regime.)

117 comments:

  1. Great post. As baseball season is nearly upon us, I will say, "You have hit it out of the park!"

    ReplyDelete
  2. Atlanta still experienced a massive foreclosure episode, as people still could not afford the houses but by easy money loans that failed.

    ReplyDelete
  3. The idea, I believe, is that over the long term, rent inflation should basically follow general inflation. DLF park place

    ReplyDelete
  4. It is my first visit to your blog, and I am very impressed with the articles that you serve. Give adequate knowledge for me. Thank you for sharing useful material. I will be back for the more great post. click aquí

    ReplyDelete
  5. Very informative post ! There is a lot of information here that can help any business get started with a successful social networking campaign ! backsplash kitchen tiles

    ReplyDelete
  6. So, some agents now limit the services they offer and change their fees accordingly. An agent may offer to advertise the property in the MLS but only provide limited additional services. singapore developer

    ReplyDelete
  7. Although serious supply-demand imbalances have continued to plague real estate markets into the 2000s in many areas I sell homes

    ReplyDelete
  8. This is such a great resource that you are providing and you give it away for free. I love seeing blog that understand the value of providing a quality resource for free. Real Estate Photography Brisbane

    ReplyDelete
  9. This is also a very good post which I really enjoyed reading. It is not every day that I have the possibility to see something like this.. Realtors claremont

    ReplyDelete
  10. A significant thought is atmosphere that must be cultivated in house building to be sufficiently able to remain against floods, storms, extreme warmth, freezing temperatures, and other exceptional climatic conditions. The establishment of a home should be steady. Local builders

    ReplyDelete
  11. I would like to say that this blog really convinced me to do it! Thanks, very good post. blue world city islamabad

    ReplyDelete
  12. Thanks for taking the time to discuss this, I feel strongly about it and love learning more on this topic. If possible, as you gain expertise, would you mind updating your blog with extra information? It is extremely helpful for me. House Hacking Case Studies

    ReplyDelete
  13. However, homeowners avoid a cosmetic change because of the time involved. Home renovation projects are notorious for being time-consuming and expensive. But, do not lose heart. disinfecting for covid using clorox bleach and lysol

    ReplyDelete
  14. Thank you because you have been willing to share information with us. we will always appreciate all you have done here because I know you are very concerned with our. best real estate agents

    ReplyDelete
  15. I wanted to thank you for this excellent read!! I definitely loved every little bit of it. I have you bookmarked your site to check out the new stuff you post. property developers in dubai

    ReplyDelete
  16. Thank you because you have been willing to share information with us. we will always appreciate all you have done here because I know you are very concerned with our. quadcopter

    ReplyDelete
  17. rental loans, Really I enjoy your site with effective and useful information. It is included very nice post with a lot of our resources.thanks for share. i enjoy this post.

    ReplyDelete
  18. orea forms explained, We are really grateful for your blog post. You will find a lot of approaches after visiting your post. I was exactly searching for. Thanks for such post and please keep it up. Great work.

    ReplyDelete
  19. Interesting topic for a blog. I have been searching the Internet for fun and came upon your website. Fabulous post. Thanks a ton for sharing your knowledge! It is great to see that some people still put in an effort into managing their websites. I'll be sure to check back again real soon. Sobha windsor price

    ReplyDelete
  20. I have read all the comments and suggestions posted by the visitors for this article are very fine,We will wait for your next article so only.Thanks! philadelphia river walk

    ReplyDelete
  21. At the point when you need to buy home office furniture you need to consider certain things.office space for rent del mar ca

    ReplyDelete
  22. Most homebuyers do not have the information, ability, and objectivity expected to investigate a home themselves. By utilizing the administrations of an expert home auditor, guides

    ReplyDelete
  23. It refreshes the lighting apparatuses in an obsolete home. Numerous individuals live in faintly lit homes and they are not even mindful of how dim it is. How to get dried paint out of jeans

    ReplyDelete
  24. For ex: A rural styled room can be organized all things considered, a nation style, a contemporary style, and so on
    nautical lighting

    ReplyDelete
  25. This comment has been removed by the author.

    ReplyDelete
  26. Very informative and amazing blog. I found it very interesting.
    Thanks for sharing
    Regards
    https://firesafetyitems.com/

    ReplyDelete
  27. Frequently it is a purchaser who demands a review of the home the person is not kidding about buying. A home investigation conveys information so choices about the buy can be affirmed or addressed, and can uncover genuine as well as costly to fix absconds that the vender/proprietor may not know about. mulberry silk sheets

    ReplyDelete
  28. Utilizing a home stager preceding starting a home flip can be helpful since a home stager is prepared to search for the corrective subtleties in a property that need the most consideration. moroccan tile

    ReplyDelete
  29. It's likewise savvy to keep an eye on proficient accreditations and licenses, where required, and be sure that the project workers you enlist are completely safeguarded and reinforced. Your town or city Building Department can give that data. Furthermore, it's vital that you ensure project workers convey laborers' pay protection: if laborers are harmed at work, you will not be responsible if the project worker is covered. Solicitation duplicates of their protection endorsements. carpet cleaning orange county

    ReplyDelete
  30. For what reason would it be advisable for me to get a home examination? home decor

    ReplyDelete
  31. For instance, your assessor will suggest you call an authorized structure engineer in the event that they discover segments of the home that are crooked, as this could show a genuine primary inadequacy. punaises de lit paris

    ReplyDelete
  32. effective content sharing
    https://imarahmarketing.com/
    https://imarahmarketing.com/blue-world-city/

    ReplyDelete
  33. Having professional team
    https://imarahmarketing.com/blue-world-city/

    ReplyDelete
  34. On his internet site you could see many different locations in which he has created this shape of artwork.hype beast

    ReplyDelete
  35. The home has a 4 ton 13 SEER appraised AC framework.
    Tajarat strives to be Pakistan's biggest real estate developer ever, guaranteeing the highest international standards, prompt execution, and lifetime customer loyalty. For further detail visit
    park view city islamabad plots for sale

    ReplyDelete
  36. What about 101 extraordinary reasons why you ought to think about this exceptionally savvy land speculation? Europa-Road targonca szállítás Debrecen

    ReplyDelete
  37. It's an extraordinary thought for you be available during the investigation - regardless of whether you are purchaser, dealer, or homeowner. Mulberry silk bedding

    ReplyDelete
  38. Informing Australia And The Rest Of The World such as Tech Business is a reliable and popular online resource of information about technology and hi-tech products. Tech News

    ReplyDelete
  39. I appreciate everything you have added to my knowledge base.Admiring the time and effort you put into your blog and detailed information you offer.Thanks. mulberry silk sheets

    ReplyDelete
  40. he following are the essentials you need to know for adding a space onto your home;

    - Make designs and get licenses from specialists.

    silk bed sheets

    ReplyDelete
  41. Dolls house development is a genuine workmanship which requires time and devotion. mélybölcsős fuvarozás Europa-Road Kft.

    ReplyDelete
  42. THEAPP was developed to allow gay community members to interact safely with and acts as a guide to "LGBTQ friendly merchants and services". In many societies up until about fifty years ago, gay people were treated as “second class” sometimes worse fine dining near me

    ReplyDelete
  43. The savviest of small home improvement contractors are using these new rules to improve their companies' image to portray a well trained professional operation. Boiler Edinburgh

    ReplyDelete
  44. Interesting topic for a blog. I have been searching the Internet for fun and came upon your website. Fabulous post. Thanks a ton for sharing your knowledge! It is great to see that some people still put in an effort into managing their websites. I'll be sure to check back again real soon. vựa cam sành tphcm

    ReplyDelete
  45. Amtico Floor Tiles are exactly what you need. The Amtico brand is intended to recreate the allure of regular material floors, with better outcomes and unrivaled execution. blog

    ReplyDelete
  46. Great Information
    https://imarahmarketing.com
    https://imarahmarketing.com/samanasmartcity/
    https://imarahmarketing.com/park-view-city-islamabad/
    https://imarahmarketing.com/blue-world-city/

    ReplyDelete
  47. Silk is strikingly surely understand for its remarkable qualities of being hypo hypersensitive, tough and residue vermin safe model.silk bed sheets

    ReplyDelete
  48. Very informative post ! There is a lot of information here that can help any business get started with a successful social networking campaign ! Lamborghini Rental Miami

    ReplyDelete
  49. As more and more people find out and as the presence of God and his kingdom increase worldwide, there is going to be a release of the Devil’s captives like the world has never seen.deliverance ministry

    ReplyDelete
  50. Incredible article distributed here by you. I have long been eager to adapt new things in relation to this topic, and there is no doubt that I have adapted new things today. Driving lessons Blacktown

    ReplyDelete
  51. What a well written and compassionate article. I found your ideas and wisdom encouraging and helpful. blue world city Islamabad payment plan 2021

    ReplyDelete
  52. This is my first time i visit here. I found such a substantial number of interesting stuff in your blog especially its examination. Really its inconceivable article. Keep it up. Cyber News

    ReplyDelete
  53. Regular visits listed here are the easiest method to appreciate your energy, which is why why I am going to the website everyday, searching for new, interesting info. Many, thank you click article

    ReplyDelete
  54. You'll be in an ideal situation in the event that you limit issues with legitimate upkeep. Look at all aspects of your home one time per year. Repair and Maintenance for Wolf appliances

    ReplyDelete
  55. Land arranging can take a "old property" that has been available for a really long time and make it a "hot property" again inside the land local area. Silk Beddings

    ReplyDelete
  56. Also, however nobody can make undeniable certainties, they would have had a way better way to rapidly sell their home. They would have gotten that house June needed. reformas zaragoza

    ReplyDelete
  57. Land arranging makes an enthusiastic reaction from the potential home purchasers that can bring about a proposition made at the time of passionate connection to the home. pintores zaragoza

    ReplyDelete
  58. It helps realtors manage their work all the more adequately when the home is flawless, coordinated and appropriately arranged
    estudio arquitectura zaragoza

    ReplyDelete
  59. FOR HOME BUYERS: A critical motivation behind why many keep away from real estate professionals is that most deals related positions have negative generalizations. instaladores de aire acondicionado en zaragoza

    ReplyDelete
  60. Home arranging adds check offer, which thusly can assist with attracting forthcoming purchasers. On the off chance that the control advance isn't acceptable, commonly the purchasers won't escape the vehicle to visit the home. limpiezas zaragoza

    ReplyDelete
  61. A natural styled room can be organized thusly, a nation style, a contemporary style, and so on
    Europa-Road targonca szállítás Debrecen

    ReplyDelete
  62. Land arranging makes a passionate reaction from the potential home purchasers that can bring about a proposition made at the time of enthusiastic connection to the home. Victorian lighting

    ReplyDelete
  63. A stager can save a home merchant the superfluous cost of purchasing furniture to arrange a home and now and again likewise lease furniture and accomplices to the homeowner for not so much cash but rather more adaptable tenant agreements. office furniture online deals

    ReplyDelete
  64. It is the specialty of adorning a home to interest all preferences and consequently will engage a more extensive scope of possible purchasers. пръскане срещу кърлежи

    ReplyDelete
  65. Wall Decor - To create decorative and pleasing walls it is important that you choose the right wall decor pieces, each casting its unique look and importance in the room. https://shuttlesky.in/

    ReplyDelete
  66. It draws the eye away from the little blemishes in a home and cause to notice the good elements of a home.pintor zaragoza

    ReplyDelete
  67. Top real estate investment in Lahore
    Contact with Aetmaad they are best and trusted source for real estate investment in Pakistan.100% Best place to invest in real estate.

    ReplyDelete
  68. Selling, or purchasing, a house is a very large cash venture. It is positioned as probably the greatest occasion throughout everyday life. The experience, information, and mastery of a realtor are an important resource. cash home buyers pittsburgh

    ReplyDelete
  69. Seeing HOMES: Real home experts have the aptitude to help you in limiting your home inquiry.long silk robe

    ReplyDelete
  70. Individuals are returning to utilizing tacky backdrop to beautify their homes like it used to be some time ago when.Silk bed sheets

    ReplyDelete
  71. Incredible article distributed here by you. I have long been eager to adapt new things in relation to this topic, and there is no doubt that I have adapted new things today.cvv me

    ReplyDelete
  72. Virtual home tours can be utilized to arrive at more expected home purchasers. What's much more noteworthy is through online media stages, they can be made to contact more people. By sharing the virtual tours on your online media accounts, you are really showcasing your home better. Silk bedding

    ReplyDelete
  73. Significant deformities, like huge differential breaks in the establishment; structure out of level or plumb; decks not introduced or upheld appropriately, and so forth These are things that are costly to fix, which we characterize as things requiring over 2% of the price tag to fix. Multivolt Services

    ReplyDelete
  74. This is very educational content and written well for a change. It's nice to see that some people still understand how to write a quality post! New lenox real estate agents

    ReplyDelete
  75. TV, footrests, stockpiling bureau/storeroom and an independent closet.mens silk pajamas

    ReplyDelete
  76. This is a great feature, so much so that you give it and give it away for nothing. Our article has generated a lot of positive interest.Commercial shops for sale in Islamabad

    ReplyDelete
  77. Long fiber mulberry silk is the thing you ought to look for in a duvet. Silk bedding

    ReplyDelete
  78. Silk is an extremely consoling texture and it can deliver endorphins in your cerebrum... the blissful chemicals. mens silk pajamas

    ReplyDelete
  79. Your reviewer will encourage you regarding how to treat these issues. He/she might suggest assessment - and on significant issues assuredly will - by authorized or confirmed experts who are experts in the imperfection regions. For instance, residential roofing in duluth ga

    ReplyDelete
  80. Allison was looking to buy a condo. She found one that she really wanted. The seller would provide owner financing. Elektrische Pfeffermuehle

    ReplyDelete
  81. The way you write, you are a really professional blogger.brains club

    ReplyDelete
  82. I think this is an informative post and it is very helpful and knowledgeable. So I want to thank you for your efforts in writing this article. All content is well thought out. Thank. brains club

    ReplyDelete
  83. Thanks for the blog loaded with so many information. Stopping by your blog helped me to get what I was looking for. Black satta

    ReplyDelete
  84. I am impressed. I don't think Ive met anyone who knows as much about this subject as you do. You are truly well informed and very intelligent. You wrote something that people could understand and made the subject intriguing for everyone. Really, great blog you have got here. Satta number

    ReplyDelete
  85. Hello I am so delighted I located your blog, I really located you by mistake, while I was watching on google for something else, Anyways I am here now and could just like to say thank for a tremendous post and a all round entertaining website. Please do keep up the great work. Satta number

    ReplyDelete
  86. This particular papers fabulous, and My spouse and i enjoy each of the perform that you have placed into this. I’m sure that you will be making a really useful place. I has been additionally pleased. Good perform! Satta number

    ReplyDelete
  87. Wow! Such an amazing and helpful post this is. I really really love it. It's so good and so awesome. I am just amazed. I hope that you continue to do your work like this in the future also Satta king 786

    ReplyDelete
  88. Thanks for the blog loaded with so many information. Stopping by your blog helped me to get what I was looking for. Satta king 786

    ReplyDelete
  89. I think this is an informative post and it is very helpful and knowledgeable. So I want to thank you for your efforts in writing this article. All content is well thought out. Thank.brainsclub

    ReplyDelete
  90. What a well written and compassionate article. I found your ideas and wisdom encouraging and helpful.brians club

    ReplyDelete
  91. What is Satta king?
    One of the main sites on the Satta king Market is the Satta King dark site. All the Satta King game outcomes are refreshed horrendously rapidly, that is the reason our visitors climb. We tend to genuinely offer gratitude to each of our visitors for making us the best site for the Satta King. We tend to conjointly show the Satta KingLog table for every one of the games extra to our Satta King pages.

    ReplyDelete
  92. This is a great feature, so much so that you give it and give it away for nothing. Our article has generated a lot of positive interest.brainsclub

    ReplyDelete
  93. Excellent read, I just passed this on to a colleague who was doing some research about it. He has already bought me lunch because I found a smile on him so let me rephrase that.brains club

    ReplyDelete
  94. Type of Satta king Game?
    There area unit over a Hundred Satta king Game on the market and 500+ Satta Matka Game on the market on the web however four games is fashionable|hottest|most well liked|preferred|most well-liked} within the world • Deshawar Satta king/Disawar Satta Result • Gali Result • Gaziabaad Result/ Gaziyabaad Result • Faridabaad Result • Delhi Satta King is simply too a lot of popularity on the web.

    ReplyDelete
  95. I think that thanks for the valuabe information and insights you have so provided here. situs judi slot online gampang menang

    ReplyDelete
  96. This is my first time visit to your blog and I am very interested in the articles that you serve. Provide enough knowledge for me. Thank you for sharing useful and don't forget, keep sharing useful info: wild west gold

    ReplyDelete
  97. Assuming that you presently have a pendant light apparatus suspended over the table, supplanting it with a ceiling fixture can truly turn the room's style up a score. modern entryway chandelier

    ReplyDelete
  98. This comment has been removed by the author.

    ReplyDelete
  99. Great article with excellent idea!Many thanks for this kind of valuable article. I really appreciate because of this great information.. we are the most trusted provider of real estate data nationwide, we have software which provides data which helps to make informed decisions. Visit us for more info. Propstream price

    ReplyDelete
  100. what a fabulous year for you & marv!!! seems like you’ve been everywhere in the world and online! =) you’re amazing~ how do you have the energy/time to blog/twitter/fb so much?! i can barely even keep up one little blog without any fbing or twittering. there are so many new posts on your blog i can’t even find the skype one~ lol!Alexandria apartments

    ReplyDelete
  101. An obligation of appreciation is all together for sharing. Furniture is a issue that we in preferred need in our domestic or workplace. In case you thinking about acquiring new goods, by way of way of then I suggest you buy victorian decorations. Since it's far altogether appealing and the association is so impeccable. For more go now

    ReplyDelete
  102. Renovation is an avenue for personal expression, allowing you to create spaces that reflect your individuality and style. Here's how you can infuse your personal touch during the renovation process.garden

    ReplyDelete
  103. Home improvement often includes aesthetic enhancements. This can involve painting walls, changing color schemes, adding decorative elements, or updating furniture and decor. Aesthetics play a vital role in creating a visually appealing and harmonious living environment.การ์ดแต่งงาน

    ReplyDelete
  104. Picture frames evolved to reflect changing artistic and design movements. The Renaissance period saw frames becoming more restrained, with a focus on harmonizing the frame with the artwork. In contrast, the Baroque and Rococo eras embraced extravagant and flamboyant frames that emphasized opulence and grandeur.Architectural Moulding

    ReplyDelete
  105. Investing in real estate, whether through residential, commercial, or industrial avenues, embodies a blend of art and science. Analyzing market trends, conducting due diligence, and envisioning future developments melds with the intuition and vision required to identify potential opportunities. The cyclical nature of real estate markets presents a landscape ripe with possibilities, where astute investors seize moments of fluctuation to navigate and capitalize on emerging trends, fostering growth and resilience within their portfolios.las campanas nm homes for sale

    ReplyDelete
  106. The world of real estate is a multifaceted tapestry, woven with diverse properties, each telling a unique story. It's a landscape where soaring skyscrapers punctuate city skylines, suburban neighborhoods exude a sense of community, and rural expanses whisper tales of tranquility. Within this realm, properties stand as more than structures; they embody aspirations, dreams, and investments. A house isn't merely bricks and mortar but a sanctuary where memories take root, where laughter echoes through hallways, and where families grow and evolve.Cash for your house

    ReplyDelete
  107. Amidst the sprawling complexities, real estate remains an investment cornerstone, a tangible asset fostering wealth accumulation and financial security. It stands as a testament to the dreams and aspirations of individuals and corporations alike, shaping skylines and landscapes while weaving an intricate tapestry that encapsulates the aspirations and ambitions of humanity.Cash for houses


    ReplyDelete
  108. I must say the this blog covers perhaps the best real estate information for realtors to stay on top. Thorough and very detail with stats and figures.
    recruitment agencies in Riyadh

    ReplyDelete
  109. The advent of technology has brought about profound changes in the real estate industry. Online platforms and digital tools have revolutionized the way properties are marketed and transactions are conducted. Potential buyers can now browse listings, view virtual tours, and even make offers online, all from the comfort of their homes. Real estate professionals use data analytics and artificial intelligence to gain insights into market trends, optimize pricing strategies, and identify potential investment opportunities. Blockchain technology is also making inroads, offering the potential to streamline transactions, enhance transparency, and reduce fraud through secure and immutable digital records.cabinet makers

    ReplyDelete
  110. Very Intresting Informastion please visit our site to know more about Brainsclub.cm

    ReplyDelete
  111. I must say the this blog covers perhaps the best real estate information for realtors to stay on top. Thorough and very detail with stats and figures. best overseas recruitment agency in pakistan

    ReplyDelete
  112. With years of experience, Sony Manpower specializes in recruiting for various sectors like construction, healthcare, hospitality, and engineering. Our in-depth knowledge of the Gulf job market makes us the top recruitment agency in Pakistan for Saudi Arabia, Qatar, Dubai, Oman, Kuwait, and Bahrain.

    top recruitment agency in Pakistan

    ReplyDelete