Economists Robert Shiller and Dean Baker have both argued that housing prices over the past century have more or less kept pace with the rate of inflation. In recent years however housing markets in many parts of the country experienced appreciation in housing prices that have far exceeded the rate of inflation. The Philadelphia metropolitan area (Philadelphia, Bucks, Chester, Delaware, Montgomery) is one of those areas with inflation-adjusted housing prices growing 52% between the fourth quarter of 2001 and the fourth quarter of 2006.

New data on housing prices has been released for the fourth quarter of 2007. Here is a brief summary of that new data.

From the fourth quarter of 2006 to the fourth quarter of 2007 inflation-adjusted housing prices fell slightly in the Philadelphia and Allentown Metropolitan areas. It is important to note that housing prices in Philadelphia and Allentown are still growing; it is just that they are as of the fourth quarter growing more slowly than all other prices.

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As reported in Building Storm from 2001 to 2006 inflation-adjusted housing prices grew the most in Philadelphia (52%), Allentown (49%), York (38%) and Reading (37%). Not surprisingly in the most recent data, housing prices grew the least (or declined) in each of these same metropolitan areas (York-Hanover is an exception but still prices in that metro are still growing much slower than they have been in recent years).

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With mortgage interest rates climbing rather than falling and credit markets still going haywire the odds seem high that prices will continue to grow more slowly if not actually decline (before adjusting for inflation) in the coming months.

--Mark Price