Cincinnati Ahead of National Market in Finding a Bottom

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Sometimes it is good to be ahead of a bad curve. The good news is the Cincinnati area is ahead of the national averages in returning to historical price ranges (see our earlier post).

We took the S&P/Case Shiller Home price index from 1987 to 2009 and adjusted it for inflation. You will notice that before the bubble, home prices were in a defined historic range. The housing bubble that began around 1999 blew this historic price range away.

We expect the national index to go below the historic price range before returning to normal pricing levels. The index released yesterday shows national home prices are still 10% to 11% above the expected pre-bubble price ranges when adjusted for inflation and it is not out of the realm of possibility to have the national index drop 10% to 15% below the historic price range.

So, where will prices end up? No one knows, but we can see the potential for another 20% to 25% drop before prices work their way back up to the historic price levels.