Inflation Adjusted Home Prices

When people talk about home prices in Whatcom County, they are usually talking about nominal prices, the actual dollar amounts buyers paid at the time. That measure matters because it reflects the market in real transactions. But it can be misleading across several years because the value of money changes. A 2025 dollar simply does not buy what a 2019 dollar bought.

To look at the trend more clearly, I indexed the Whatcom County median sale price to March 2019 and then tracked two series as a 3-month average. The first is the nominal median price, which shows what homes sold for in each period. The second is the inflation-adjusted median price, which converts those later prices into March 2019 dollars so the comparison is more apples-to-apples.

Since 2019, nominal prices are up about 62%, but after adjusting for inflation the increase is closer to 22%. In other words, a meaningful portion of what looks like appreciation is really the changing value of the dollar over time, not pure market gains. The average annual gain in real terms is 2.9%. How does that compare to historical data? We only have national statistics. Over the last 30 years it has been 2.9% nationally, but home prices over the past 100 years show that real home prices have only increased 0.5% per year on a real basis.

That is not to say housing is affordable right now. It definitely is not. Affordability remains stretched because prices are still high relative to incomes, and mortgage rates have been elevated compared to the last decade. But affordability has been improving slightly as rates have come down from their highs.

For context, the affordability index I track is a function of median price (single-family and condo, 3-month average), household income, and interest rates. It assumes 20% down and 1% for property tax and insurance. With mortgage rates hitting 5.99% today, the affordability index rises to 65.3. Interpreting that number is straightforward: it represents the share of the median-priced home that the typical household can afford under those assumptions. Put another way, if the median price were $1,000,000, the typical household could afford about $653,000.

While inflation-adjusted prices help explain why “big gains” can look smaller in real terms, the affordability index helps explain why the market still feels tight on a monthly-payment basis. The recent improvement is a step in the right direction, but we are still far from a market that most households would describe as affordable.