Housing Prices Still Have a Long Ways to Fall

[CivilLiberty]

I took the well known Case-Shiller inflation Adjusted chart, and made a few modifications.

1) I plotted forward from the point wherethe bubble peaked, and then collapsed. In red, I plotted an estimated forward projection.

2) I also added trendlines - The BLUE lines show the long term trendline of housing value growth. The lower blue line is the base trendline - notice how well it works going back all the way to 1890. Housing grows at inflation plus 0.19% - i.e. it beats inflation by 0.19% a year.

3) The upper trendline is the upper "trading range". Notice that wntil the present bubble, it hasn't been broken since 1895.

4) In financial markets, prices return to trendline (the lower blue line) eventually. There is no reason to believe that today's housing prices won't return to the lower blue line over the next decade. Base trend lines act like a "magnet" unless some world changing economic event (like WWII) takes place.

Happy house hunting....


Andy

 

[Fraulein Hilda]

Interesting. I work in the bidness and think it ain't over yet, either.

Housing is a commodity like any other, but like any other commodity, is not necessarily subject only to the influences of inflation. For instance, if you tied that chart to growth of real income, unemployment, interest rates, etc., you might find similar or different cause and effect relationships.