Why Did Houses Get So Expensive?

Housing prices in the US have seen large increases in recent decades— particularly in areas like California and Manhattan. Home prices have soared to easily eclipse their high’s before the 2007 crash. The median home now sells for over $325,000, and there are around 200 cities across the country where a median home runs you $1 Million or more.

Here we can see the fast rising US home prices:

Another way we can look at home prices is the Case-Shiller Index — developed by economists Karl Case and Robert Shiller (winner of the 2013 Nobel Prize in Economics). The index looks at the values the same homes sold over a period of time, and is generally considered to be a more accurate picture of changes in home prices.

After adjusting for inflation, home prices are still a bit below their 2006 peak. However, we can also see home prices have still risen nearly 40% since 2000.

So what gives?

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