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In
order to most accurately determine prior market price cycles one must remove the effects of inflation and look at real historical prices. The past thirty years have seen three real price cycles and the beginning of a fourth in Las Vegas. As the market is now in a downturn a point to consider is the prior downturn cycle, which involved marginal nominal prices and falling real prices. Market cycle time periods have varied from the market downturn of fifteen years to the prior market growth cycle of nine years.
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|
Time
Period |
Real
Price History |
Real
Price Change |
Nominal
Price History |
Nominal
Price Change |
1978:Q2
- 1982:Q1 |
$182,000
- $216,400 |
18.9% |
$60,500
- $99,200 |
64.1% |
1982:Q1
- 1997:Q2 |
$216,400
- $166,600 |
-23.0% |
$99,200
- $131,100 |
32.2% |
1997:Q2
- 2006:Q1 |
$166,600
- $320,800 |
92.5% |
$131,100
- $313,800 |
139.3% |
2006:Q1
- 2006:Q4 |
$320,800
- $313,500 |
-2.3% |
$313,800
- $313,500 |
-0.1% |
The
mortgage-debt-to-income ratio is commonly viewed as the most accurate method of determining market cycles. The past thirty years have seen three cycles and the beginning of a fourth, all of which included large changes in home affordability. The peak in 1982 is an abnormality due to all time high mortgage rates. It does however act as the turning point of a nearly 17 year improvement in Las Vegas home affordability. Due to this abnormality of the late 1970s and early 1980s, the median affordability ratio is skewed. Consequently, despite the fact that home affordability is only marginally above the median, the current level generates concern as it has reached a volatile level.
|
Time
Period |
Las Vegas
Mortgage-Debt-to-Income Ratio |
Las Vegas
Ratio Change |
National
Mortgage-Debt-to-Income Ratio |
National
Ratio Change |
1978:Q2
- 1982:Q1 |
30.1%
- 61.9% |
106.0% |
22.5%
- 38.6% |
71.3% |
1982:Q1
- 2003:Q2 |
61.9%
- 17.8% |
-71.2% |
38.6%
- 16.8% |
-56.4% |
2003:Q2
- 2006:Q2 |
17.8%
- 33.4% |
87.4% |
16.8%
- 23.5% |
39.9% |
2006:Q2
- 2006:Q4 |
33.4%
- 31.3% |
-6.3% |
23.5%
- 21.7% |
-7.5% |
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