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House Prices, Inflation-Adjusted


By ttsmyf   Follow   Wed, 14 Nov 2012, 2:52am PST   3,078 views   23 comments
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Patrick   Wed, 14 Nov 2012, 3:35am PST   Share   Quote   Permalink   Like   Dislike     Comment 1

So what does this mean for predicting prices, if that's even possible?

bmwman91   Wed, 14 Nov 2012, 3:41am PST   Share   Quote   Permalink   Like   Dislike     Comment 2

Print, baby, print. Everyone with the GUTS to borrow the absolute maximum from a bank will be house-wealthy. These are not the droids you are looking for.

maxweber21   Wed, 14 Nov 2012, 3:51am PST   Share   Quote   Permalink   Like   Dislike     Comment 3

Yep, print, print, print. But can they please send me a bundle?!

What we need are some "cost of bread" comparisons. Sort of the "adjusted to oz gold" charts. Cause I'd love to see that same chart overlain with the inflation adjusted income. And dream to have it with the inflation adjusted cost of an apple (since a loaf of bread in 1700 was probably whole weat and not the melt-in-your-mouth, low nutrient stuff cheapest on the shelf today).

Aother thread on stock market adjusting 20% is silly in that it ignores printing. Stock market should continue to go up in fiat dollar amount despite dropping in terms of real value.

Housing prices will probably stagnate. I think someone mentioned Japan rates dropped for like 15 years. That seems to be the trend here. While insurance, food, water, and suck continue to run up, housing costs will probably stay about the same as the money suppliers try to pump it up with QE credit.

One remote possibility though is if the QE stock market winds were somehow redirected to housing. Maybe long term gains tax no stocks and not on REIT? Or somesuch thing I can't imagine. That QE money is like an attacking horde driving up stock prices. If it wanders to a new home, that would go up enormously.

ttsmyf   Wed, 14 Nov 2012, 3:53am PST   Share   Quote   Permalink   Like   Dislike     Comment 4

Patrick says

So what does this mean for predicting prices, if that's even possible?

The past is commonly used input for estimating the future. SO, the past should be soundly shown -- that is, inflation-adjusted!
I do not estimate the future, but I do note the latest past compared with extrapolated, longer-term past. See shortly below the first chart here:
http://www.showrealhist.com/RD_RJShomes_PSav.html

maxweber21   Wed, 14 Nov 2012, 3:55am PST   Share   Quote   Permalink   Like   Dislike     Comment 5

BTW, chart maker is clearly trying to show a trend line. Might be true. But I suspect young people will never have enough money to buy houses at today's prices. So, will need more bailout/stimulus/freebies. Probably going to need some of those next year to keep prices up. Probably will have them too. For every $1T QE to investment banks, give $10B to the people. :-)

Robber Baron Elite Scum   Wed, 14 Nov 2012, 3:58am PST   Share   Quote   Permalink   Like   Dislike     Comment 6

Realtards are praying for a "Cash for Dumps" federal government program from Obama.

maxweber21   Wed, 14 Nov 2012, 3:59am PST   Share   Quote   Permalink   Like   Dislike     Comment 7

Hey ttsmyf, also very possible his chart doesn't show what he thinks but shows inflation is being falsely reported. Don't that would surprise any housewives who shop on a budget. They already know it. He thinks it shows the DOW and housing have a ways to drop. It probably shows his "inflation adjustment" is bogus.

bmwman91   Wed, 14 Nov 2012, 4:01am PST   Share   Quote   Permalink   Like (2)   Dislike     Comment 8

maxweber21 says

Housing prices will probably stagnate.

Don't be foolish. Housing ALWAYS goes up. Buy NOW, or be priced out FOREVER.

ttsmyf   Wed, 14 Nov 2012, 4:13am PST   Share   Quote   Permalink   Like   Dislike     Comment 9

maxweber21 says

Hey ttsmyf, also very possible his chart doesn't show what he thinks but shows inflation is being falsely reported. Don't that would surprise any housewives who shop on a budget. They already know it. He thinks it shows the DOW and housing have a ways to drop. It probably shows his "inflation adjustment" is bogus.

FOR SAME usage of CPI-U for inflation adjustment, see the four NYT and WSJ links near the bottom of:
http://www.showrealhist.com/RHandRD.html

gbenson   Wed, 14 Nov 2012, 4:51am PST   Share   Quote   Permalink   Like (2)   Dislike     Comment 10

How can you call the bit of data from 1920-1940 a floor for today's economy? Prices have not dipped below your 'ceiling' in 60 years... (Maybe you live in the basement?)

Obviously after 1940 something changed and what you have labeled as a ceiling, I would label as a new floor.

Whose to say whatever cultivated the new floor in the 1940's isn't reoccuring in some form now, and that American's are now more tolerant of being at the 55-60 level and we mope along at these levels for the next decade.

Bellingham Bill   Wed, 14 Nov 2012, 4:55am PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 11

bmwman91 says

Everyone with the GUTS to borrow the absolute maximum from a bank will be house-wealthy.

I can't say this is bad advice necessarily.

The least painful solution is basically adding a zero to all prices.

This will wipe out the SSTF, but that's only a $2.6T loss, and the nation's rich didn't want to pay that back anyway.

Anybody in land now will come through that smelling very, very good.

This is of course why I don't want them to print, but tax.

But taxes suuuck, so they're pretty much off the table.

Cuts? Forgettaboutit.

We're so fucked.

ttsmyf   Wed, 14 Nov 2012, 4:57am PST   Share   Quote   Permalink   Like   Dislike     Comment 12

LiarWatch says

Prices are still elevated with nothing but air under them.

The NYT chart of 2006
http://www.nytimes.com/imagepages/2006/08/26/weekinreview/27leon_graph2.html
includes "Two gains in recent decades were followed by
returns to levels consistent since the late 1950's.".
As recounted herein
http://www.showrealhist.com/RD_RJShomes_PSav.html
I used the quoted NYT observation as basis for the ‘extrapolated history’ level of 54. on my chart:
http://www.showrealhist.com/RD_RJShomes_PSav.html

ttsmyf   Wed, 14 Nov 2012, 5:02am PST   Share   Quote   Permalink   Like   Dislike     Comment 13

LiarWatch says

Prices are still elevated with nothing but air under them.

(This is the same reply as above to LiarWatch.)

The NYT chart of 2006
http://www.nytimes.com/imagepages/2006/08/26/weekinreview/27leon_graph2.html
includes "Two gains in recent decades were followed by
returns to levels consistent since the late 1950's.".
As recounted herein
http://www.showrealhist.com/RD_RJShomes_PSav.html
I used the quoted NYT observation as basis for the ‘extrapolated history’ level of 54. on my chart:
http://www.showrealhist.com/RD_RJShomes_PSav.html

ttsmyf   Wed, 14 Nov 2012, 5:30am PST   Share   Quote   Permalink   Like   Dislike     Comment 14

Bellingham Bill says

bmwman91 says

Everyone with the GUTS to borrow the absolute maximum from a bank will be house-wealthy.

I can't say this is bad advice necessarily.

The least painful solution is basically adding a zero to all prices.

This will wipe out the SSTF, but that's only a $2.6T loss, and the nation's rich didn't want to pay that back anyway.

Anybody in land now will come through that smelling very, very good.

This is of course why I don't want them to print, but tax.

But taxes suuuck, so they're pretty much off the table.

Cuts? Forgettaboutit.

We're so fucked.

I try to keep it simple. Our system is 1-person/1-vote, so it has to be a bad idea (for the common good) to fool the people. To unfool the people, let’s start by identifying the fooling!
See "The public be suckered" here:
http://www.showrealhist.com/RD_RJShomes_PSav.html

See “F... the people.” in “Ongoing extremes” last Letter here:
http://www.durangotelegraph.com/index.cfm/archives/2008/june-26-2008/soapbox/
The URL in the Letter is now
http://www.showrealhist.com/RD_RJShomes_PSav.html

ttsmyf   Wed, 14 Nov 2012, 7:32am PST   Share   Quote   Permalink   Like   Dislike     Comment 15

robertoaribas says

according to war, the only time home prices were properly priced, was the Great Depression!

Also, a home from 1940 ain't exactly the same thing as one today...

1000 square feet

1 bath room

No garage

Small electric service with 2 wire electricity, no ground

No ac

Factor the difference of the average home today, to then, factor in
interest rates and today's prices look very reasonable, in most
places... California coastal excepted.

Starting "Also, ...", you greatly misapprehend.
(1) Read the explanatory text in the NYT chart:
http://www.nytimes.com/imagepages/2006/08/26/weekinreview/27leon_graph2.html

(2) Herein:
http://www.showrealhist.com/RD_RJShomes_PSav.html
below the three bullet points below the last chart, read the following:
From page 8 of NYSEArca-2008-92.pdf, downloaded from
http://www.nyse.com
... The Indices measure changes in housing market prices given a constant level of quality. ...
... The Indices use the "repeat sales method" of index calculation -- an approach that is widely recognized as the premier methodology for indexing housing prices -- ...
... The Indices are designed to measure, as accurately as possible, changes in the total value of all existing single-family housing stock. ...

swebb   Wed, 14 Nov 2012, 8:29am PST   Share   Quote   Permalink   Like   Dislike     Comment 16

The thing I take away from the graph is that except for 2001-2009 buying a house was probably a pretty safe bet, assuming you didn't end up selling in the short term or buy something in Detroit. Even if you bought in 1989, you'd be fine if you sold in 99 or later. After you take into account principal paydown, tax advantages and inflation (which helps when you are in debt), that chart doesn't look very scary at all...well, except for the minor detail starting in about 2000.

It actually appears to be a lot more safe than a lot of things in life.

ttsmyf   Wed, 14 Nov 2012, 10:17am PST   Share   Quote   Permalink   Like   Dislike     Comment 17

swebb says

The thing I take away from the graph is that except for 2001-2009 buying a house was probably a pretty safe bet, assuming you didn't end up selling in the short term or buy something in Detroit. Even if you bought in 1989, you'd be fine if you sold in 99 or later. After you take into account principal paydown, tax advantages and inflation (which helps when you are in debt), that chart doesn't look very scary at all...well, except for the minor detail starting in about 2000.

It actually appears to be a lot more safe than a lot of things in life.

Re. the cited 'exception', it was/is massively punishing -- please see 'Bubbles relative to GDP' near the bottom of
http://www.showrealhist.com/RD_RJShomes_PSav.html
The late 1970s and late 1980s bubbles were much smaller nationally, but NOT so much smaller where they were localized -- coast(s). Keeping the real price histories out of sight is SO ENABLING for bubbles!!!

bmwman91   Wed, 14 Nov 2012, 11:57am PST   Share   Quote   Permalink   Like (1)   Dislike (1)     Comment 18

E-man says

How about a combination of tax and print? :)

You are from another country, so I know you don't understand the principles of America. You see, in America I want it NOW because I deserve it, and I don't want to fucking pay for it. We vote for the guys that promise to continue doing the right thing, kicking the can down the road, rather than committing atrocities like raising taxes. You need a little perspective my friend. I am sure that things might have seemed bad wherever you came from, and for your sake I hope that you never need to know the pain, the terror, the sheer horror that so many of us Real Blooded (TM) Americans have had to live with; the threat of paying more taxes for infrastructure and basic services. Serious human rights violation shit here.

Now, off to trade-in my old (18 months, ick) Acura SUV lease for the newest model. It is just like the last one, but it has heated CUP HOLDERS! I bet I can qualify for financing, probably. I just won't tell them about my house payments (or NON-payments, living free for 3 years now haHA), or the payments I am making on my new 84" LED TV, or the payments on my wife's new pair of hooters. See, life in America is TOUGH. You have to be man enough to be financially astute while making sure that the above basic needs are covered.

/AmericaFuckYeah

mell   Wed, 14 Nov 2012, 12:25pm PST   Share   Quote   Permalink   Like   Dislike     Comment 19

http://market-ticker.org/akcs-www?post=213915

Loved that paragraph about Zillow and zestimates:
"If you happen to believe Zillow then my house has gone up dramatically (ridiculously so) in value over the last few months. You don't think that's related to Obama's election and the well-known connection between Zillow and the Democrats, do you?

I have a suggestion -- anyone publishing such a Zestimate should have to do so in the form of writing a "PUT". That is, by doing so they're writing an option that the owner can choose to exercise if they so wish and "PUT" the house on the publisher for the claimed "value"!

I've long advocated that tax assessors should have to live with this, but we ought to extend it across the board to both appraisers and so-called "web estimates" and similar. In short, put your money where your mouth is or shut up.

I'll make this clear right here and now -- if you think that the Zestimate reflects the actual value of my home as of the date of this posting you may show up at my door with a cashier's check made for that amount (don't bother trying to play a game here; I know what the amount is and printed a copy of the current Zestimate) and it's all yours. This offer expires in 30 days; I may as well take the (fictitious, in my view) capital gain before rates go up on January 1st."

David Losh   Thu, 15 Nov 2012, 1:51am PST   Share   Quote   Permalink   Like   Dislike     Comment 20

We don't have true inflation without wage increases. What we do have is an increasing amount of personal debt which compensates for that lack of income.

So, lower house payments don't make the asset value higher.

At some point there has to be deleveraging. At some point speculation in commodities will be worthless because the consumer can't pay any more.

If you look at the charts in the link it could predict asset prices will fall to 1980, or 1990 levels.

http://chartingtheeconomy.com/?cat=27

ttsmyf   Thu, 15 Nov 2012, 2:45am PST   Share   Quote   Permalink   Like   Dislike     Comment 21

David Losh says

We don't have true inflation without wage increases. What we do have is an increasing amount of personal debt which compensates for that lack of income.

So, lower house payments don't make the asset value higher.

At some point there has to be deleveraging. At some point speculation in commodities will be worthless because the consumer can't pay any more.

If you look at the charts in the link it could predict asset prices will fall to 1980, or 1990 levels.

http://chartingtheeconomy.com/?cat=27

You do not adjust for inflation. I offer looking at debt/income. See the second chart here:
http://www.showrealhist.com/RD_RJShomes_PSav.html

David Losh   Thu, 15 Nov 2012, 7:58am PST   Share   Quote   Permalink   Like   Dislike     Comment 22

ttsmyf says

I offer looking at debt/income

Just consider for a moment how much of that Dow activity is tied to bogus asset values, and people promising to pay mortgages.

It should be clear by now that housing prices won't be propped up much longer. Governments have bigger fish to fry.

The question is where money will go next. Real Estate is dead as an investment.

bmwman91   Thu, 15 Nov 2012, 8:04am PST   Share   Quote   Permalink   Like   Dislike     Comment 23

Oh David Losh, how I wish you were right. But, to think that RE market manipulation will end and allow prices to fall...well, please pass me whatever you are smoking, it must be the good stuff ;)

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