A query from Steve got me curious about how the ratio between housing prices & residential construction costs might have varied over the years. Fig. 1 plots the ratio of Case-Shiller indexes & the Census Bureau’s Fisher Index of New One-Family Houses Under Construction, for each month from January 1987 through April 2009. For comparison purposes, I’ve also plotted the ratio of Case-Shiller to CPI (with 2005 = 100).
Note: CS10 = Case-Shiller 10-City Index; CS20 = Case-Shiller 20-City Index
Fig. 2 takes a longer view, plotting the ratio of Robert Shiller’s Real Home Price Index & Real Building Cost Index for 1890-2005.
Wow! Yeoman work dude. It looks like they all track together, so no leading indicator. Cancel my Nobel in economics. In your longer term graph, it looks as though the ratio often peaks before a recession, but at varying levels, so also not a good predictor. The ratio varies a lot more than I would have expected. Is it tracking interest rates also?
Steve
Steve – I believe the Shiller spreadsheet I linked to above also has interest rates for each year. The Fed also has historical data on various interest rates here:
http://www.federalreserve.gov/releases/h15/data.htm
Thanks. Will probably have to wait until I get home. Wireless here is slow and my wife’s laptop does not have everything bookmarked that I use to help and verify.
Steve
“Wireless here is slow and my wife’s laptop does not have everything bookmarked that I use to help and verify.”
Perhaps, “Pat”, you should bleg for assistance from the Wireless Sisters.
I may not have a wife, but if I did, I think her laptop would be bookmarked high among my Favorites several times weekly.
Her notebook PC would also, no doubt, rank high in my esteem…
If you had a wife you would be scared to mess up her computer like all of the rest of us.
Steve
If I had a wife – or should I say, if one had me, as one has a child, or little brother (like the sixth Marx brother, Stucco, best known for being plastered on the set most of the time) – she’d be scared to read my blog posts, especially the weekly roundups with c. 130 links: “No wonder we never talk.” “Maybe if you spoke in JavaScript, we would.”
LOL, she loves your posts. She just criticizes mine. Only my son says he finds my posts interesting. They do seem to interest him more just before he wants something, but I am sure that is just a coincidence.
Steve
…the sixth Marx brother, Stucco, best known for being plastered on the set most of the time… That would indicate that they kept him well-watered, since he never seemed to set right after being plastered.
MI, what’s the explanation for the divergence of the CS20’s at 2000? Is that the first year of the 20-city indexes?
Thanks, I know I should look into them myself, but duty (work messes) calls… ;-)
“Only my son says he finds my posts interesting. They do seem to interest him more just before he wants something”
Li’l steve2, aka steve2.5: “Dad, can I get this motorbike? As this DoD chart I found in Small Wars Journal shows, it maneuvers better in high-intensity urban theatres, er, handles city traffic better, than rival makes – and for whatever reason, those who own them in their teens have lower mortgage-default rates and higher savings rates decades later!”
Stevedad: “OK, Li’l – if you clean your room, and practice summarising those next-gen counterinsurgency papers I left on your cheerios tray.”
2.5: “Pop, you’re the best milblogger a kid could ever have.”
what’s the explanation for the divergence of the CS20’s at 2000? Is that the first year of the 20-city indexes?
Yes; the 20-city index starts January 2000. For whatever reason, its value for that month is extremely close to that of the 10-city index (100.59 vs. 100.75), so in my graphs above show the 20-city index diverging from the 10-city index upon initiation.