I’m working on a new paper tracking aggregate real estate values over time, and I happened upon this curious nugget. This is a little bit of specul

Erdmann Housing Tracker

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2023-01-24 03:00:10

I’m working on a new paper tracking aggregate real estate values over time, and I happened upon this curious nugget. This is a little bit of speculative analysis, but these little shadows of our hobbled housing market show up all over the place, if your personal Overton Window is positioned to see them.

Erdmann Housing Tracker is a reader-supported publication. Paid subscribers receive all posts and monthly data updates of cyclical vs. supply changes in home values.

Figure 1 is a chart from 1959 to 2021. The gray line is the estimate of total owner-occupied real estate from the Fed, divided by total personal income estimated by the BEA. The blue line is the Case-Shiller price index, deflated with CPI. The orange line is the difference between the two.

These are fundamentally different measures. The aggregate value/aggregate income measure is the estimate at a point in time. Compositionally, it changes over time. We build new homes and we earn higher incomes over time. The Case-Shiller measure and the CPI attempt to track the real value of the existing housing stock over time, without compositional changes.