The FRED® Blog

Home prices in the United States

The price of housing has been a major topic in the United States over the past decade, especially given the expansion of the housing market over the past 4 years.

In this FRED blog post, we want to measure how affordable homes have been for the typical earner, focusing on the house price itself but not factoring-in the cost of a mortgage. So, we compare the median weekly earnings for those 25 years and older with the S&P US national home price index, using the first quarter of 2020 as a point of reference.

Our graph shows that, since the first quarter of 2012, there’s been a gradual increase in the house price index relative to wages. This is followed by a dip at the beginning of the pandemic and a rapid increase in the house price index relative to wages in the subsequent quarters. This is consistent with rising home prices throughout the pandemic.

After this peak in the price index relative to wages, in the second quarter of 2022, our index stagnates around the same values as the peak during the 2005-06 housing bubble. Will the index follow a path similar to the one from 2007 to 2012? Only the future will tell.

How this graph was created: In FRED, search for and select the series “S&P CoreLogic Case-Shiller U.S. National Home Price Index.” From the “Edit Graph” panel in the top right corner, use the Edit Line 1  option to customize the data and add the series “Employed Full Time: Median Usual Weekly Nominal Earnings (Second Quartile): Wage and Salary Workers: 25 years and over.” In the formula section, divide series a (price) with series b (earnings). Select the units to be an index and choose the reference date for the index to be 2020-01-01. Finally, change the start date to 2001-01-01.

Suggested by Alex Bick and Kevin Bloodworth.

The price of natural gas has never been this low

In our previous FRED Blog post, we argued that the price of electricity varies by region and fluctuates but does not appear to increase with respect to other goods. Today, we take a quick look at the price of natural gas.

In the FRED graph above, we’re looking at the price of natural gas at a particular location: the Henry Hub in Erath, Louisiana. This is the connection point of several natural gas pipelines, and local markets are typically priced by a differential from the Henry Hub price. We use monthly prices here to avoid the wild fluctuations of daily prices.

So, how has this reference price for natural gas evolved? It is striking how it’s now the lowest it has ever been. And we haven’t even taken into account the inflation in general prices since the start of this data series. The main factor has been the big increase in the supply of natural gas, in particular through fracking. Another factor has been the building of many pipelines, which allow suppliers to avoid higher prices through arbitrage.

There have been fluctuations, though. One recent example is the winter of 2022, when Russian pipelines in Europe closed at the start of the invasion of Ukraine and increased worldwide natural gas prices. This shock resolved in a year thanks to major energy conversion efforts across Europe.

How this graph was created: Search FRED for “natural gas price” and take the monthly series.

Suggested by Christian Zimmermann.

The price of electricity across metro areas

The Bureau of Labor Statistics collects a lot of data, some of which is available in FRED. For example, there is the cost of household fuels in various parts of the country. The FRED graph above shows the price of electricity in three major metropolitan areas.

What do we learn from this graph? First, there are significant differences across regions. While there are large electricity markets that allow for some arbitrage, they do not appear to be perfect. Obviously, sending electricity across the country to take advantage of a higher price is not free. Second, these differences are persistent and vary little, likely a reflection of these transmission costs that are relatively stable. Third, the cost of electricity has increased quite a bit, lately in particular.

But did the cost really increase? What matters in the end is whether the cost of electricity increased relative to the costs of other goods. To measure this, we modify the first graph to obtain the graph below, by dividing each series by the consumer price index (CPI). (Note: There are CPI series for several major metro areas, but unfortunately they were discontinued in 2017; so, we have to make do with a national series.) Now we see that price of electricity has bounced around, but in the end it has not changed much.

How these graphs were created: Search FRED for “average price electricity” and select the Dallas series. Then click on “Edit Graph,” open the “Add Line” tab, search again, and select Boston. Repeat with Los Angeles. You have the first graph. For the second, within each line, search for series “CPI,” add it, and then apply the formula a/b. Repeat for the other lines.

Suggested by Christian Zimmermann.