The US housing market part 2: The states

Following on from part 1, how have the states fared? As I mentioned, I’m keenly interested in how submarkets perform compared to the overall trend.

US House Price Index 1991-2011 by state

US States over time

Source: FHFA raw data + my own analysis

I hope my point is now made that submarkets behave very differently. Take a look at Nevada (NV). An unfortunate soul purchasing property in 2006 would have suffered a whopping 56% fall in value! However, over the same period in the same (US) market, a property-owner in Texas (TX) enjoyed a 4% increase in value.

The exact reasons will be the subject of endless debate, but I believe that Wendell Cox and the Unconventional Economist might be on to something with their theory that restrictive land-use policies cause the volatility, as cities with responsive policies and easily bring on new supply and keep the price equilibrium fairly stable.


6 thoughts on “The US housing market part 2: The states

  1. A 127% fall in value? it’s a strange way of accounting. Please clarify, given NV ‘buyers’ aren’t being paid to take on homes, how is it possible for a home to fall >100%

    • OK, I see now. I’d taken the raw data and calculated the percentage as the change from the reference year (1yr, 5yr, 7yr, 20yr) to the current as a percentage of the current. So in the NV case, the 127% means the change from 5yrs ago (272) to 2011 (119). As in (272-119)/119.

      You’re right though, it doesn’t make any sense to show it like that. It’s more intuitive just to show the percentage change as percentage of the reference year. That is, a change from 272 to 119 is 56% decline. I’ll recalculate and update that actually.

      Good pickup.

  2. Also be interesting to show those values vs the absolute return (incl dividends) of the stock market and also (both?) normalised to real values (ie, taking account of inflation).

  3. Have updated to show the percentage change relative to the year it’s taken from. Makes a bit more sense now. I’ll consider your request for the stock market comparison. Would be an interesting one.

  4. Good to see the updates!
    Due to the wonders of compound interest it can be seen that very few of those states have kept up with investing at 5% p.a, with interest paid quarterly. For example:

    Yrs 3% 5% <———– interest rate for the column

    1 3% 5% <———– after 1 yr
    5 16% 28% <———– after 5yrs etc
    7 23% 42%
    10 35% 65%
    20 82% 171%

    As your readers can see, a 7yr investment at 5% paid monthly will return 65% over 10 years. If we now look at your chart only two of the states exceed this!

    Again, if we look for a 3% return over 20 years, it seems that less than half the states in the table fail to meet even this modest return.

    “The most powerful force in the universe is compound interest” — Albert Einstein

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