Tuesday, March 6, 2012

US housing relative value benchmarks

US homes are beginning to look attractive on a relative value basis. Here are three metrics from Capital Economics that give an indication of value in the US housing markets:

1. Measured on an inflation adjusted basis, US home prices are now at the 1999 levels.

Case-Shiller: nominal vs. real (source: Capital Economics)

2. For those who don't believe the official inflation numbers, here is what US housing prices look like denominated in gold.

Source: Capital Economics

3. The most reliable way to benchmark housing in terms of relative value is to compare home prices to US households' disposable income as well as to the equivalent rental expenses. This shows both the absolute and the relative levels of home "affordability".

Source: Capital Economics

Update: see Comments (below) - comparison to other parts of the world.
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