Design & Geography

This is the second installment (by Matthew Mulbrandon and Catherine Mulbrandon) on Housing Price Index (HPI) by state in the United States. The first set of maps can be seen here. This new set is inflation adjusted and covers the entire span of the Federal Housing data set 1991-2010.

Much of the present debate on the future of the US economy has centered around Case-Schiller HPI and their suggestion that housing has historically risen with inflation (at least in their 20-city database). Of course context is everything so unemployment, income, urban development, housing supply, demographic change, other financial opportunity all play their part.

HPI USA 1991-2010 (pdf)
Data source: Federal Housing Finance Agency

These maps give a nice snapshot into ground zero of the housing crisis in California, Nevada, Arizona, and Florida. Historically it would appear that California and Nevada are less prone to a further drop than fellow western states. Florida and Arizona, while up over the past twenty years, have not increased by much as compared with other parts of the country and both have had substantial population increases and are not fixed to the old industrial economy. Although it has been a bad decade for Michigan, it did well in the 90s and seems to fit in with fellow rust belt states of Ohio and Indian over the long term. State dominated by the megalopolis DC to Boston (while not having large increasing the 90s) have gone up substantially in the last decade. If this increase is justified remains to be seen. DC itself has gone up 112 percent and did not have the same decline in prices after the housing bubble burst as many other places (not shown on the scale). Louisiana probably had a larger increase in housing prices resulting from the destruction of the housing supply in 2005 by hurricane Katrina. The western states with large price increases have had large numbers of white/non Hispanics migrants from California as well as traditional immigrant groups Asians and Hispanics. It is also very urban, 90 percent or more, and the great plains states have weathered the recessions without much unemployment.

The value of owning a home is determined by the rent, increase over inflation minus depreciation 1.5 percent (estimated), taxes, insurance, although there are many tax brakes and financial incentives that homeownership brings. That along with increasing population of urban areas makes me think that housing will naturally increase faster than inflation in a growing economy like the US. The post below shows the difference between HPI methods in the last 20 years.

I created the maps below (with Catherine Mulbrandon) to show the nominal Housing Price Index (HPI). They give a quick and easy glance at the bubble in housing prices in the United States by state. As you have probably seen in the news the bubble was largest in the West in states such as California, Arizona, and Nevada and Florida in the South East. Those states had the largest increase from 2000-2006 (height of the bubble) and the largest decrees from 2006-2010. One can see how homeowners ended up “under water” on their mortgages and left banks and taxpayers with major loses. However, from 2000 to 2010 all states except Michigan had moderate nominal price increases. Michigan missed out on the price increase but with the nation’s highest unemployment rate and with it’s major metro area, Detroit, being the most segregated metropolitan area in the U.S., Michigan crashed along with California and Florida.  However, what goes up does not necessarily crash. Virginia, Maryland and NJ all experience large price increases with relatively small decrease. These states are dominated by NY and Washington DC metro areas. Future posts, will focus on smaller geographic areas as urban economic and social dynamics play an important roll in the nation. Unlike the stock market, which changes over time but is the same price no matter where you are located the housing bubble was characterized by change in space and time. (you can get a pdf here)

In the past, housing bubbles have been regional in nature but starting in 2006 nation-wide price declines (even global) are evident although certainly concentrated in particular regions.

Typically what gets reported on the news is the Case-Shiller index for home prices. It only tracks the change in the price of recent homes sales compared to the the last time they were sold in 20 metropolitan areas around the country while excluding those that have undergone major improvement of renovations. This obviously create some bias as the country may experance different dynamics from the housing the Case-Shiller index. One can see the difference here:

The Federal government tracks the same numbers, but also has the information for over 200 metropolitan areas (MSA). They also provide a Housing Price Calculator for metropolitan areas going back 20 years so people can find out what has been happening where they live. Some of the results are surprising. For example over the last decade (starting in q40 middle of graph) there was a price bubble in Boise, Idaho with home prices up 80% over the 2000-2006 time period. However, by 2010 they were only up 30%, which just keeps pace with inflation.

This chart show housing prices for Boise, Idaho 1991-2010

Housing Price Calculator will also give you a chart like this for your community.