People ask me all the time whether I think the housing market is turning around. I've personally been seeing a slight turn myself and quite honestly 2009 was the best year I've ever had in real estate, but I wanted to share this chart with you for those that don't want to take my word for it.
The above chart estimates the market value of today's median-priced house over a 40-year period.
The thick red line represents real house prices. For those unfamiliar with economic terminology, "real" prices are prices that have been adjusted for inflation. The thick blue line represents nominal house prices. The thin lines represent the pre-bubble (1970-1999) trend lines.
Notice that in the downturn of both the Inflation-adjusted house prices (thick red line) and the Nominal house prices (thick blue line) have dropped to now almost be back in line with the pre-bubble trends. Ok, yes they could go below the pre-bubble lines, but if you look at the history of this chart all the way back to 1970, the home prices do not typically drop very far below that line.
This chart tells me (as it tells most housing economists) that we are quickly moving back to a normal market. Personally, I think we'll see that happen this year.
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