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State-by-state differences in house price appreciation

It’s no secret house prices differ across the U.S. There are also large differences in how these prices change over time. In the short-term, the data include a lot of noise and temporary regional peculiarities. Over the longer haul, though, clear trends can emerge. The map shows a price index for all house transactions: The index was set to a value of 100 in the first quarter of 1980, and the map shows the index values as of the third quarter of 2017. So, we can see how house prices have increased over the past 37 years. Keep in mind this is a nominal index and that price increases are expected everywhere, given general price inflation. For comparison, an index value of 316 in 2017:Q3 would reflect price increases that have exactly kept pace with the consumer price index. For example, house price increases in Missouri and New Mexico (index values of 317) are nearly even with inflation.

Unfortunately, the District of Columbia, which has the highest house price inflation, isn’t visible on this map. D.C. has an index value of 856, which reflects a 5.9% increase per year in nominal terms and a 2.8% increase per year in real, general-inflation-adjusted terms. The location with the lowest house price inflation is West Virginia, with a value of 233, which reflects a 2.3% increase in nominal terms and a –0.8% increase per year in real terms. In fact, house prices in 12 states have appreciated below the CPI, meaning that houses there have appreciated less than the average of all consumer goods.

Does this means real estate isn’t a good investment? While the numbers shown here can provide rough estimates, it’s important to understand their limitations. This index is computed by looking at transactions that involve single-family homes with conventional mortgages that satisfy the guidelines of Freddie Mac or Fannie Mae and is based on repeat sales of such properties. Thus, this map does not reveal the prices for all houses and the quality of the relevant housing stock may also change over time. For example, purchased houses may become larger over time, and the qualifications for inclusion in this index may also change.

How this map was created: The original post referenced an interactive map from our now discontinued GeoFRED site. The revised post provides a replacement map from FRED’s new mapping tool. To create FRED maps, go to the data series page in question and look for the green “VIEW MAP” button at the top right of the graph. See this post for instructions to edit a FRED map. Only series with a green map button can be mapped.

Suggested by Christian Zimmermann.

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