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A real estate market report issued last week by a Northern Trust Economist reveals that home prices are still at a high, despite the recent economic decline and collapse of the real estate bubble. The analysis, based on the Case-Shiller Price Index and median household income data from the Census Bureau for 2008, shows that real estate prices have yet a ways to fall before real estate market prices bottom out.

“Excluding the go-go years when home prices climbed rapidly, the median price-to-rent ratio and mean price-to-rent ratio during 1987:Q1 – 2001:Q4 were 94.31 and 96.38, respectively. Compared with these numbers, the 125.4 price-to-rent ratio in the second quarter of 2008 is still at an elevated level. It appears that home prices have a long march ahead when compared with the mean (109.6) and median (102.5) price-to-rent ratio for the period 1987-2008:Q2 also.

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“The median price of an existing single-family home as a percentage of median disposable income rose to a record high of 469.5% in 2005, far above the median value of 337.9% during the history of this series (1968-2007) which includes the inflationary period of the later 1970s and the sharp increase in home prices seen in the first seven years of the current decade. Excluding the problematic period of the 1970s and the current decade, the median was 336.5%… Irrespective of which of these statistical measures one uses to evaluate the current status of the housing market, the median home price of an existing single-family home as a percentage of median household income was significantly higher than historical trends at the end of 2007… If history is any guide, both gauges — price-to-rent ratio and the median price as percentage of median household income — suggest that the bottom of home prices is not here yet.”

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Source: “A Perspective on Home Prices,” by Asha G. Bangalore. Copyright 2008 Northern Trust Global Economic Research.

Tags: foreclosure homes, foreclosure investing, foreclosure news, foreclosure report, Real Estate, real estate bubble, real estate market report

This entry was posted on Thursday, September 4th, 2008 at 12:14 pm and is filed under Foreclosure, Real Estate. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.