$374,000 is the median home price in the US.
$180,000 was the median in 2012.
$223,000 adjusted for inflation.
A 67% increase in 10 years, adjusted for inflation.
$160,000 was the median in 2002.
$251,000 adjusted for inflation today.
An 11% decrease from 2002-2012.
$100,000 was the median in 1992.
$199,000 adjusted for inflation today.
A 26% increase from 1992 to 2002.
I posted a poll in asking the question of it’s a good time to buy a home now.
13% said yes
68% said no
21% said unsure
I wanted to look at the price history of real estate, over the last 30 years to see if there is a bubble going on or if there’s still a good opportunity to buy.
Looking at that, the last 10 years have been significant, where there’s a 67% increase in the median home price now, versus this time a decade ago, which is bigger than the decrease from 2002-2012 and bigger from the 26% increase from 1992 to 2002.
Cherry picking years is also a weird approach, so I want to just do a quick check in the 10 years from 1997 to the burst of the real estate bubble, 2007.
1997, the median was $116,000, which is $204,000 adjusted for inflation.
2007, the median was $217,000, which is $300,000 adjusted for inflation.
An increase of 47%
Just a quick comparison on that, the price increase of real estate went up 47% in the 10 years before the real estate bubble burst.
Today, that number in the last 10 years is 67%.
That’s a pretty good indicator a bubble is happening and ready to bursts, but there is a counter argument to this.
A decade ago, the real estate market was still in a downturn, due to 2008 crash, where real estate nationally had a 25% downturn in price in 2012, from what it was five years prior in 2007.
This could make a case the real estate market having a 67% growth from 2012 to today being higher than the 47% growth in the ten years from 1997 to 2007 isn’t that big of a deal.
To run a comparison on that, I want to see what would happen in the last 30 years price wise, if real estate values held at the 26% growth rate from 1992 to 2002, which is more in line with the last 50-100 years, versus the changes in the last 20.
$251,000 was the median home price adjusted for inflation in 2002.
If that held normally, without the 2007-2008 bubble/crash, homes would have a median price of $316,000 by 2012, versus the $223,000, which it was.
If that $316,000 price had another 26% growth rate, we’d see $398,000 as the price by today.
Which would actually be over $20,000 higher versus the median home price today.
This all brings up the final question. Is the US in a real estate bubble?
That’s really hard to tell and I don’t think a clear answer exists on.
In 2002, that was the start of the bubble, so even using the 26% number could be a little high.
That being said though, I feel many people are bringing up the growth in the last decade being higher than the decade before the 2008 crash as a reason to justify a bubble. Something which I don’t believe is true, due to part of that being recovery.
All said and done, I think there is probably some bubble going on and if a person is living in a market which has had prices surge heavily recently, they probably shouldn’t buy.
It’s also not a bubble which seems as bad as 2008 though.