x
Quick Insights

Are Rising Home Prices Tied to Inflation?

by
on
5/31/2022
Are Rising Home Prices Tied to Inflation?

Interested in buying a home but worried about inflation?

With the constant bombardment from the financial media about rising inflation it makes you wonder how the rest of your daily life might be affected. I think we all notice that gas prices, select grocery products and used cars all seem to be getting more expensive but what about the house you live in? The average home price across the United States has been on the rise since 2012, here at Rasgo we started to wonder if this price increase could be attributed to inflation.

It just so happened that one of our employees' parents were trying to buy a house and were frustrated with themselves for not moving in 2014 when they had an opportunity. We decided to use their situation as the base of our experiment. 

Before we started we had to decide a few things, how are we accounting for inflation, what markets do we want to track and finally should we discount back to 2014?

We decided to use the Consumer Price Index to track inflation. For those of you unaware, the Consumer Price Index or CPI is the commonly believed index for tracking inflation. The U.S. Bureau of Labor Statistics describes the CPI as:

“a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. Indexes are available for the U.S. and various geographic areas. Average price data for select utility, automotive fuel, and food items are also available”

Next, we had to find the housing data. Luckily, Zillow (a website used to buy, sell and compare home prices), has an API and free data sets for the entire country. These datasets are all available online and can be found here

Using free datasets obtained from FRED we pulled the monthly Consumer Price Index and the monthly Zillow Home Prices by Zip Code across the country. Now, we understand that different markets have different rates of appreciation and that all housing markets are different but we wanted to measure some select markets for our employees parents and generally across the United States. 

Below you can see the general layout and the different transforms we performed in the Rasgo interface, all without having to write a single line of SQL. 

Drag and drop Rasgo Interface

Using our free Rasgo UI interface we pulled the data in and within 5 minutes we were able to merge the datasets, adjust for inflation and, using Rasgos visualization capabilities, plot the prices in 2014-dollars. 

The concept here was to find the CPI on a given date, and then adjust the Home Price in terms of that year’s dollars. For example, the CPI in October 2014 was 237.443. Therefore,
HOME PRICE IN 2014 DOLLARS = ( HOMEPRICE / CPI ) * 237.443

Based on the data that was modeled and the graphs that we pulled below you are able to see that inflation accounted for roughly $20,000 dollars worth of value in the home price. 

Needless to say we informed our employees' parents about our findings with the hopes that they might find a better deal!

Rasgo visuals of national home prices versus inflation.

If you are interested in finding your own insights these free datasets are available in the Rasgo online application

We will continue to add more interesting data for you to play and find insights in. Please feel free to send us anything special that you’ve found! 

Disclaimer: It is prudent to say that no one should be using this for investment purposes. These insights were found as a fun experiment and should not be used to inform any business or investment decision. Please consult your financial professional before any action is taken.

No-code/low-code data prep and visualization