Mind the Gap: Where would home prices be if the bubble never happened?

I love love love this brand new presentation of housing trends by MacroMarkets. For those of you unaware, MacroMarkets is the firm founded by housing economist Robert Shiller, he of the Case-Shiller Index. They’ve included Altos Research data to round out the application so you can see market trends beyond just prices.

They call it the Gap Gauge web application. You ever wonder how far housing will have to fall to get back on it’s natural trendline? Are we there yet? The Gap Gauge illustrates the “gap” between where we are and where we might expect to be sans bubble. Is it a good time to buy? Mind the Gap.

MacroMarkets Gap Gauge shows national and regional housing trends using the Case Shiller Index and real estate market data supplied by Altos Research

Home Prices Compared to their Pre-Bubble Baseline

Specifically, the Gap Gauge is a free tool that quantifies the difference between the current level of a home price index and its corresponding baseline level.  The baseline level is a simple extrapolation of the average rate of home price growth as measured by S&P/Case-Shiller Home Price Indices before the year 2000, after which prices in many residential real estate markets began appreciating at unprecedented and unsustainable rates.

Says Terry Loebs, managing director at MacroMarkets, “We hope that this simple tool provides additional context for constructive debate regarding the future outlook for U.S. housing markets. And we turned to Altos Research to provide our Gap Gauge users access to housing supply and demand data that are important, interesting, and timely.”

Music to my ears.