Interesting article showing home peaks/troughs in different markets

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Submitted by bibsoconner on January 2, 2020 - 6:29pm

At the risk of showing everyone something they've already seen, I thought there might be general interest in this article showing housing prices through the years in different major cities. Rich has us covered for San Diego, but this shows LA, Seattle, SF, etc.

https://wolfstreet.com/2020/01/01/the-mo...

One question I have ... You'll notice the y-axis on all graphs is "index value". How is this calculated and is it inflation adjusted? I assume it is not inflation adjusted or you would come to the conclusion that most of the markets are in a bigger bubble than in 2006-2010. If it's not inflation adjusted, I suppose I could use an inflation calculator to correct the charts. It would be nice if they were already in such a form.

Submitted by Rich Toscano on January 2, 2020 - 7:24pm.

Unfortunately they are not adjusted for inflation, which makes them pretty meaningless when it comes to comparing expensiveness over the long term.

You should be able to pretty easily generate something like this with FRED. First go here:

https://fred.stlouisfed.org/search?st=ca...

Pick your city to graph it. Then FRED lets you do transformations, which includes dividing one series by another. You can do this by clicking "edit graph," then "customize data". In the box where you can add a series, type CPI and choose it when it comes up. Then in formula, type "a/b".

This is basically telling it to graph Case-Shiller/CPI, which is what you are looking for.

Submitted by bewildering on January 2, 2020 - 8:56pm.

The graphs are based on the Case-Shiller - FWIW this is their description of how the values are calculated.

This is house price inflation.

The Case-Shiller Index, by comparing the sales price of a house in the current month to the price of the same house when it sold previously, tracks how many more dollars it takes to buy the same house over time, thus tracking the purchasing power of the dollar with regards to houses in various markets. This makes the index a measure of local “house-price inflation.” When the index shows that prices in Los Angeles shot up 188% in 19 years, despite the plunge in the middle, it doesn’t mean that houses have nearly tripled in size or opulence, but that in that metro, the dollar’s purchasing power with regards to houses has gotten crushed.

Submitted by bibsoconner on January 3, 2020 - 9:13am.

Thanks Rich. I played with the site a bit. Adjusting for inflation, San Diego was much more expensive in early 2006 than it is now. Somebody really should start a website about that :)

Seriously, if I did the graphing correctly San Francisco is about as expensive now as it was in 2006 even adjusted for inflation. Maybe I can get FRED to show me the least expensive and most expensive cities relative to their ~2006 peaks.
Finally I note that Honolulu and Hawaii and many other cities are not listed cities. Honolulu is about 350,000 folks so not trivial.

S.F graph:

Submitted by Rich Toscano on January 3, 2020 - 9:50am.

The SF chart didn't display right, you can add it with the "Add image" link near the bottom of the comment page. Or email it to me at rich at piggington and I will put it up.

Anyway it's not too surprising about SF; incomes have gone absolutely nuts there because of the tech boom. You have software developers (individual contributors, not managers) making over 500k. So incomes have gone up way in excess of inflation. How sustainable it all is is another question, but it makes sense that SF home prices have risen much faster than inflation. (If you could find it, it would be interesting to chart SF prices vs. incomes).

Submitted by The-Shoveler on January 3, 2020 - 11:11am.

IMO someone would need to pay me 500K a year to live in SF LOL.

Don't know why anyone is so crazy about that town from the little bit I have seen of it.

Submitted by bibsoconner on January 3, 2020 - 11:21am.

Image of SF Case-Schiller/CPI

San Francisco Case-Schiller/CPI - Notice we are back in a peak even adjusting for inflationSan Francisco Case-Schiller/CPI - Notice we are back in a peak even adjusting for inflation

Submitted by bibsoconner on January 3, 2020 - 11:25am.

I wouldn't mind making 500K/year. I can tell you firsthand that software engineers in San Diego don't get that. I think some young people have the perfect idea: go work in SF and live in your car - wrack up a huge nest egg.

The-Shoveler: Not sure I'd want to live in SF (primarily because of the prices) but it sure is nice to visit. Reminds me of Paris. I suppose all the homelessness bothers some people. I live in OB, so it doesn't phase me.

Submitted by flu on January 3, 2020 - 12:20pm.

The-Shoveler wrote:
IMO someone would need to pay me 500K a year to live in SF LOL.

Don't know why anyone is so crazy about that town from the little bit I have seen of it.

it's not a bad gig if you are single.

Submitted by The-Shoveler on January 3, 2020 - 4:20pm.

I guess that's the key, good place to build wealth while you're young and single (maybe a good place to own rentals if you got in early enough etc..).

Could not see myself living there now or long term (more than 10 years or so) when I was younger.

Submitted by svelte on January 3, 2020 - 5:00pm.

We go there a lot.

I've said for decades that I love visiting that city, but never want to live there.

We have friends we stay with sometimes, and I have to admit the neighborhood is appealing to me...as a visitor. I enjoy the time I spend there. But that's just because I can leave the downsides behind when I go home after a few days.

The living room window of our friend looks out over a popular neighborhood corner. It is amazing to have pedestrians stick their head in the window and say they like that song, or "hi", etc. I have never lived or visited a place like that before. We were there last St Patty's day, so maybe everyone was just feeling extra friendly that day. Kinda fun.

And the grocery store is across the street, several good bars and restaurants within a few hundred feet, it basically eliminates the need for a car.

The flip side of having something that open is obvious. But it sure is fun as a visitor.

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