- Recently and unprecedentedly,
home prices AND stock prices (expressed in consumer purchasing power)
are contemporaneously far above extrapolated historical trends.
Chart y-axis is 0-100 for both Real Dow and Real Homes;
for each, the all-time high is made equal to 100.
The Real Dow and the 1.64 %/yr curve (here extrapolated) are from
"the compelling Real DJIA, 1924-now" at
http://homepage.mac.com/ttsmyf
The Real Homes data are from a Robert J. Shiller website ("This site
offers updated information relating to the book Irrational Exuberance
by Robert J. Shiller.", 2nd ed., April 2005):
Real Home Price Index data
in Excel file
Fig2-1.xls (Tue, May 26, 2009)
downloaded from
http://www.irrationalexuberance.com
on May 26, 2009. The latest annual datum is for 2006.
The 1890-2006 dates (column A) are just the four digits.
The 1913-2006 Consumer Price Index values (column O, BLS CPI-U)
are for the month of January (center is mid-Jan.).
The 1987-2006 Nominal Home Price Index values
(column I, S&P/Case-Shiller U.S. National Home Price Index)
are for the first quarter (center is mid-Feb.).
So, the 1920-2006 Real Home Price Index values (column B, quotient
of I and O) are all dated February 1, the average of the foregoing.
After 2006, Nominal Home Price Index data are quarterly.
The CPI-U values are for the initial month of the quarter.
So, resulting Real Home Price Index values are dated 2/1, 5/1, 8/1 and 11/1.
NOTE: as elaborated at
http://homepage.mac.com/ttsmyf
The New York Times published a plot such as Real Homes on 8/27/06, and
The Wall Street Journal published a plot such as Real Dow on 3/30/99.
- Contemporary with the remarked-above behavior of
home prices AND stock prices are
(1) the downward drift of the personal saving rate for more than two decades,
and (2) the accompanying doubling of the household debt/income ratio after 25 years
in the narrow range 0.52 - 0.60.
See the first below chart. The two traces of annual data serve to show
progressions to recent values that are very extreme relative to
history before the mid-1980's. For Personal Saving as % of Personal Income,
latest months' data do show a sizable increase (future-indicative?) --
elaboration is here.
The second below chart is the chart at the top of this page,
repeated here to facilitate comparing.
Federal Reserve Board authors recently published plots such as
those in the second above chart; see Figure 1 herein:
http://www.federalreserve.gov/Pubs/Feds/2007/200737/200737pap.pdf
For Personal Saving in the second above chart, data sourced 2/28/2009 from
Table 2.1. Personal Income and Its Disposition (A) (Q)
Last Revised 2/27/09
of
U.S. Department of Commerce
Bureau of Economic Analysis
National Economic Accounts
National Income and Product Accounts Table
at
http://www.bea.gov/national/nipaweb/SelectTable.asp?Selected=3
My calculated
Personal Saving as % of Personal Income
(line 34 is different: % of Disposable Personal Income)
equals
line 33, Personal saving
divided by
line 1, Personal income
multiplied by 100.
NOTE: For 2008, the thus obtained is 1.59%. Adjustment for the 2008
Economic Stimulus Payment, most of which was saved, would give 1.01% --
see here.
For Ratio of Debt to Income in the second above chart, Income data,
which are calendar year, identical to the above ("line 1, Personal income").
Debt data, which are end-of-year, sourced 3/12/2009 from
Board of Governors of the Federal Reserve System
Flow of Funds Accounts
Release Date: March 12, 2009
file
z1r-2.pdf Debt growth, borrowing and debt outstanding tables
downloaded from
http://www.federalreserve.gov/releases/z1/Current/
Table D.3 Debt Outstanding by Sector
Domestic nonfinancial sectors, Households, Total
NOTE: The above sourcing is for debt data 1977 to the present.
Earlier data are from Table L.1 in files
a1975-1984.pdf, a1965-1974.pdf, a1955-1964.pdf, and a1945-1954.pdf,
downloaded from
http://www.federalreserve.gov/releases/z1/Current/data.htm
My calculated
Ratio of Household Sector Debt to Personal Income
equals
average of the two 12/31 Debt data bracketing the calendar year
divided by
Personal Income datum for the calendar year.
- The four indices shown below include IrrExubRJS US (black), which history is included in
"A History of Home Values" (U.S.) chart
in the 8/27/06 N.Y. Times, accompanied by
"Two gains in recent decades were followed by returns to levels consistent since the late 1950's."
The other three indices are S&P/Case-Shiller Home Price Indices.
-
For IrrExubRJS US (black), SUPPOSE that its historical "1958-1998, DID return to ca. 54"
is used to infer the candidate future "WILL return to ca. 54". (This inference matches the
'not-overshooting' one stated by Robert Shiller in May 2009: "That is the issue, whether we'll
overshoot and end up being below, in inflation-adjusted terms, where we were in 1997.")
Then all four indices are far above their inferred "WILL return to" levels (see chart).
For example, the S&P/C-S US (green points) level of 64.1 in mid-February 2009
would have to be 16% lower to equal its inferred "WILL return to" level of ca. 54. Much
elaboration is at Homes' Mispricing: Straight Lines!.
-
Of course, but just to be sure it is clear: a 16% lower Real Home Price Index
corresponds to a 16% lower US$ home price, at constant CPI-U.
The "IrrExubRJS US" black data are identical to the "Real Homes" data
in the chart at the top of this page (green trace).
The S&P/Case-Shiller Home Price Indices are
the leading measure of U.S. home prices.
From page 8 of NYSEArca-2008-92.pdf, downloaded from
http://www.nyse.com
... The Indices measure changes in housing market prices
given a constant level of quality. ...
... The Indices use the "repeat sales method" of index calculation --
an approach that is widely recognized as the premier methodology
for indexing housing prices -- ...
... The Indices are designed to measure, as accurately as possible,
changes in the total value of all existing single-family housing
stock. ...
The "S&P/C-S 10" red points are the S&P/Case-Shiller 10-City Composite
Home Price Index, released monthly, as inflation adjusted by me.
(At this 9/2/07 writing,) the S&P/Case-Shiller 10-City Composite
Home Price Index data are from a S&P website:
monthly Composite CSXR data
in Excel file
CSHomePrice_History_082857.xls (Tue, Aug 28, 2007, 6:25 AM)
downloaded from
http://www2.standardandpoors.com/portal/site/sp/en/us/
page.topic/indices_csmahp/0,0,0,0,0,0,0,0,0,1,1,0,0,0,0,0.html
Last datum 'for June 2007', actually it's a 3 month moving average,
so it's a April-June average (dated mid-May), so I divided it by
the average CPI-U for April-June; scaled to make all-time high = 100.
Same for "S&P/C-S 20" blue points, except it is S&P/Case-Shiller
20-City Composite Home Price Index, data are Composite-20 SPCS20R.
Same for "S&P/C-S US" green points, except it is S&P/Case-Shiller
U.S. National Home Price Index, released quarterly, from Excel file
csnational_values_082857.xls (Tue, Aug 28, 2007, 6:24 AM)