Inflation-adjusted Home Prices from 1963 to 2010

Inflation-adjusted home prices
It’s time for a trip back in the LocalVector Time Machine! Taking a look at these types of long term metrics can grant detailed insights into a market you may be considering buying into. The chart above depicts inflation-adjusted housing prices from 2010 to 1963 based on the latest data published by the Census Bureau.

The left column shows today’s prices; the right column depicts its equivalent in 1963.

For example, the median price of a home in 1963 was $18,000. Adjusted for inflation, that amounts to about $130,000 in 2010. As you can see above $18,000 and $130,000 are parallel on our graph, reflecting this correlation.

The main driving force of this price increase is inflation. Between 1963 and 2010 the compound cumulative inflation of the United States has been over 600%.  This means that both prices and incomes have increased more than 7-fold since 1963.

You may be wondering how the average trend is consistently above the median. What you are seeing here is statistics at work! When this average is calculated, all homes are accounted for—even the most expensive properties in the area. Those expensive homes are called “outliers” in the statistical model, and they pull the average up higher than what it would be if they were not included.

The median calculation tries to find the ‘middle of the road.’ You can find the median by looking at the one or two transactions that would be in the middle of the list if you were to order them lowest to highest. The median is not impacted by outliers, which is why it trends lower on our graph.

The peak years in terms of inflation-adjusted prices have been:
1968
1973
1979
1989
2005

The trough years were:
1970
1982
1992
2009

 

Years 2011 and 2012 have not yet been reported by the Census Bureau, yet, but we know from local data and other public reports that prices enjoyed a subtle increase in 2011 and a substantial increase this year, bringing current home values to their 2003 levels.

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