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House Prices, Inflation-Adjusted
By ttsmyf Follow Wed, 14 Nov 2012, 10:52am 2,042 views 26 comments
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So what does this mean for predicting prices, if that's even possible?
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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.
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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.
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Patrick says
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
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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. :-)
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Realtards are praying for a "Cash for Dumps" federal government program from Obama.
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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.
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maxweber21 says
Don't be foolish. Housing ALWAYS goes up. Buy NOW, or be priced out FOREVER.
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maxweber21 says
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
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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.
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bmwman91 says
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.
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LiarWatch says
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
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LiarWatch says
(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
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Bellingham Bill says
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
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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.
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robertoaribas says
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. ...
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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.
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swebb says
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!!!
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Bellingham Bill says
How about a combination of tax and print? :)
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E-man says
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
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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."
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some of my home's zestimates are ridiculously high, others are just as ridiculously low...
Only the pat.net crowd of nitwits would turn that into a "housing price-democratic conspiracy"
Anybody intelligent would simply figure out that their zestimate estimator has a great deal of variance.
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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
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David Losh says
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
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ttsmyf says
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.
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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 ;)