Sunday, August 28, 2005

US Median House Price

The Median House Prices in the United States from 1963 to 2004 is listed in the following table. You can also find the year over year grwoth in the house prices in the third column of the table. There were only two instances in the last 4+ decades when the year over year growth in the median prices of the home was negative. After one such instance, from 1969 to 1970, the median house prices rose sharply in the 70s; and before another small decline in 1990 the prices rose in the mid 80s. The average growth rate for the median house prices for the last 41 years is 6.26%.

Note: To see the latest median and average house price go to my latest post "Median and Average House Prices in USA Since 2000"

YearMedian House PricePercent Gain
Average Median House Price Growth6.26%

The following chart depicts the data above. The last data point of 2004 looks out of sync. We may see some mean reversion in the following year. I hope this chart provides a clear picture to you about the US housing market.

US Median House Prices
One important thing to think about from this post. The median house prices rose on average 6.26% each year for last 40+ years, and today's mortgage rates are below 6%.

All disclaimers apply.

Data Source:


Robert the Red said...

The comment about the ratio of the house price rate to the interest rate is interesting. However, if these are the median sales price data, then since houses have been getting bigger over the years, the figures don't represent the change in value of a fixed set of houses (e.g., the one I own).

I believe there is data that follows a fixed set of houses, which would be more interesting. Also, displaying in constant-value dollars (i.e., allowing for inflation) would be more of a "real return" kind of thing.

Extradry Martini said...

This data/chart is meaningless if inflation is not taken into account. The reason house prices have gone up is because money has devalued. In real – inflation adjusted – terms, that house worth $18,000 in 1963 is only worth $35,600 in 2004. That’s a real rise of 1.6% per year, which I’ll wager is mostly explained by wage growth.

Real estate has no magical properties as an asset class, despite people believing it does from time to time. When they do, a bubble is formed which subsequently pops and everyone gets hurt. Looking at price data in the last 50 years tells us nothing – better to look at Florida in the 1920’s, Japan in the last 15 years or Hong Kong 1997-2002.

Having said this, the bubble is likely to continue for some time before it bursts.

Steve said...

Comparing the home value with inflation adjusted dollars neglects one other very critical factor.

The home provides shelter in lieu of rental housing.

If you add back to the value of the home the cost of rental housing and perhaps deduct some of the costs of ownership you get a better measure.

Steve said...

True, inflation needs to be factored in, but what is more important is that owning a home provides the opportunity for appreciation as a secondary benefit to its value in providing shelter.

If you want to do a true comparision you need to do an analysis which adds the savings in rent and deducts the operating costs which would be paid by the apartment landlord.

In addition to these strictly economic issues home ownership often provides a host of additional benefits.

Anonymous said...

If you look at Robert Shiller chart of housing price over 116 years the National median house price should be around $100,000. The jump in the past 7 years is abnormal.

Raphael said...

If housing has grown 6% on average over 40 years, and if you can lock your mortgage rates in now below 6%, then who cares about inflation?

I'm not sure of rental yields in the US, but in Australia they're typically 5%, operating costs in the long term might run at 2.5%, so that's another 2.5% of creme on top.

If you live in it and can claim a tax deduction on the interest, with a marginal tax rate around 40%, then a 4% interest rate drops to 2.4%. Add in depreciation of the building at 2.5% p.a. (I assume you also have this in the US?), and the fact that you can gear it at 95% LVR, or even higher, with no margin calls, and it starts to look pretty attractive.

Long term returns on the stock market, if you take the depression into account are roughly 7%. All in all housing ain't that bad an investment, even if the tenants are a pain :)

Carol said...

So, what does it mean when you look at a particular property as a percentage of median price. That is, If a house was bought in 1980 for 106% of median and it is now work about 120% of median, does that mean you invested well??

Anonymous said...

How did you come up with this data? I don't believe that it is correct. Please cite your sources if you didn't make it up. Thanks.

Anonymous said...

Don't you not see the datasource at the bottom of the post?

Anonymous said...

yea,I totally agree with comment number 9.Think or in this case look befor you act.This is for comment number 8.

Anonymous said...

The median home price is one of the most common measurements used to compare real estate prices in different markets, areas, and periods. It is said to be less biased than the mean price since it is not as heavily influenced by small number of very highly priced homes.

Rocky Hayes