Home Price Index

For several years now, the S&P/Case-Shiller Home Price Index has been published for 20 metropolitan areas across the country. The data for 10 of the markets go back to 1987 and Charlotte, NC is one of those. On my web site, http://www.mikelowryco.com/ I track various trends that compare Richmond, VA to eight similarly sized MSAs including Charlotte. To see the charts I developed from the most recent Case-Shiller Index, go to this link.

Since Richmond and the remaining MSAs were not included in the aforementioned index, I was delighted to find historical data for all of my MSAs at the Federal Housing Finance Agency (FHFA). Accordingly, I have completed and posted the charts here. Additionally, I included trend lines to reflect a 3% and 4% annual appreciation from the first quarter of 1980 for each MSA, the 9 market average, and for the United States as a whole. Since I grew the index by a quarterly compounded rate, the actual increase each quarter was .742% and .985% rounded.

Based on this long term average appreciation of either 3% or 4%, it would appear that all of the reviewed markets are still quite overvalued except perhaps in Memphis, Birmingham and Louisville, (if you use the 4% annual rate). However, even if you believe 4% is a good long term appreciation rate in this FHFA Index, several markets, including Richmond are well from reaching their pricing bottoms as summarized below:

Richmond.....13% overvalued at 4% and 35% overvalued at 3%
USA.....12% overvalued at 4% and 34% overvalued at 3%
9 Market Average.....9% overvalued at 4% and 31% overvalued at 3%
Hampton Roads.....28% overvalued at 4% and 46% overvalued at 3%
Charlotte.....10% overvalued at 4% and 32% overvalued at 3%
Raleigh....5% overvalued at 4% and 28% overvalued at 3%
Jacksonville.....20% overvalued at 4% and 40% overvalued at 3%
Memphis.....23% undervalued at 4% and 7% overvalued at 3%
Nashville.....12% overvalued at 4% and 34% overvalued at 3%
Birmingham.....2% undervalued at 4% and 23% overvalued at 3%
Louisville.....0% overvalued at 4% and 24% overvalued at 3%

Now I realize this is a fairly simplistic approach towards attempting to understand what may have to happen for a complete correction in home values is over, but it may provide some insight as to how far prices need to fall before they are back near a hypothetical long term trend of between 3% and 4% annual appreciation.