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Old 05-01-2012, 09:14 PM   #1
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Historic housing prices chart, adj for inflation

Interesting article today at:

http://www.smartmoney.com/spend/real...?mg=com-sec-sm

See excerpt chart below for historic housing prices adjusted for inflation. Personally, I think we are going to hit another dip below the 100 year average, similar to the one from 1920 to 1940 shown in the graph.

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Old 05-02-2012, 01:35 AM   #2
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Very nice Unobtanium!
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Old 05-02-2012, 07:38 AM   #3
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thanks Unobtainum - I've seen that chart somewhere a while ago. Also, there's another one, in terms of "mean house price" vs. "mean household income" (don't bother that it was ONE (father's) salary in 1950s, and it is TWO salaries today, but anyway). I agree, that since markets tend to naturally overshoot downwards after bust, we will yet to see some epic lows in housing prices - andf it is even without all the other economic disasters just waiting to happen.

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Old 05-02-2012, 08:41 AM   #4
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It would be interesting to see the charts if they used John William's numbers for CPI instead of the muted numbers from the government.

I see that the gist of the article is that now is a good time to buy. I believe that we have a ways to go yet before housing will recover.
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Old 05-02-2012, 09:00 AM   #5
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yeah theres plenty who reckon the overshoot to the downside is broadly similar to the overshoot to the upside

and how does this chart compare with the 'priced in gold' chart ?

http://whiskeyandgunpowder.com/us-house-prices-in-gold/
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Old 05-02-2012, 09:11 AM   #6
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The biggest difference I see is that the "priced in gold" chart shows a low in 1980. The chart in the OP shows a peak in 1980. Makes sense when you consider the run the metals had during the Bunker Hunt days.
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Old 05-02-2012, 09:41 AM   #7
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Originally Posted by PMBug View Post:
The biggest difference I see is that the "priced in gold" chart shows a low in 1980. The chart in the OP shows a peak in 1980. Makes sense when you consider the run the metals had during the Bunker Hunt days.
Yes, that was a somewhat anomalous period in the big picture, yet we still dream about it ....

any reference to hunting for bunkers, is a bit worrying for me though
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Old 05-02-2012, 12:13 PM   #8
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Nice chart!

I personally believe that when something overshoots that much, you will have a "bungee effect" whereby the thing overshooting to the upside comes crashing below the long term trend line before bouncing back to the long term line.

I think we are still looking at another twenty percent drop in home prices, maybe more. If the economy stalls and falls again, you won't be able to sell a home at any price because people will be simply surviving.
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Old 05-02-2012, 01:32 PM   #9
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Efforts to keep the magnitude of the correction from being as severe as needed will determine the duration of the correction. So if the magnitude of the dip is 1/2 the magnitude of the peak, we should expect the duration to be twice as long. 1/3 should result in 3 times the duration, etc etc...

Either way.. It's still going to be a while before homes are bargains.
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Old 05-02-2012, 04:43 PM   #10
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If the housing market goes down?

I'd like a bit more research on this than in that article. It's lacking something very important. First if RE is tied to inflation, which it only is loosely as the price of houses has typically increased at a higher % rate than inflation, then is inflation really going to stay at 2.8% or less for the next five years?

What does that do to Precious metals?

My Opinion: The current housing prices and further decrease is ludicrous. I owe several houses in NJ from $400k to $600k and I'm current renting them for $500/mo than my refi'd mortgages. If the prices go down further, my profits will only go up more and like many RE investors will snatch them up before that happens. Essentially if prices drop more, demand will skyrocket, supply goes down, value goes up...you guys know the routine.
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Old 05-02-2012, 05:01 PM   #11
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That chart is adjusted for inflation.

What it is saying is that as an asset class, real estate might appreciate in nominal terms but not in REAL terms. IMO, that is a fair expectation.

Overall, it's a fair assessment of the current situation. We spent 3-5 years at one extreme, we will need to see the same to the opposite extreme in order to maintain the average. If we try to "fix" the problem by making the magnitude of the correction smaller, the duration of the correction will have to be longer. It's pretty basic math and the same concept is in physics.

If you want an interesting case of where magnitude was severely reduced in favor of duration, look at japan.
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Old 05-02-2012, 10:51 PM   #12
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Came across this graph also:
http://www.oftwominds.com/blogapril1...ce=Patrick.net



The gray box reads:
Quote :
Home buyer tax credits, HAMP, HARP, Mortgage Writedown, Delayed Foreclosures, Government Support, Operation Twist, ZIRP, Fraudclosure Settlement....This is all that the [govt] recovery money can buy?

What happens when interest rates start to rise?
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Old 05-03-2012, 06:21 AM   #13
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Originally Posted by kjansen1969 View Post:
...If the prices go down further, my profits will only go up more and like many RE investors will snatch them up before that happens. Essentially if prices drop more, demand will skyrocket, supply goes down, value goes up...you guys know the routine.
...if there is enough "RE investors" that can afford them, that is... which is questionable, in the economy that is strapped among others, by unaffordable real estate prices. Secondly, what is happening to rents, when there is a rush of "buy to rent" investors? I am telling you, it happened here in Ireland, too, and my rents are only going down from the top of the boom, and landlords are more than happy to further lower rent, if they have good tenants.

Lets's just follow your example. You said $400k, $600k houses... I say, WTF?!?!? Half a mill dollar, +/-, for a freaking HOUSE, and this is supposed to be a bargain? Who can afford that? What are median/mean family incomes in your state? What are their respective credit abilities for a house (they also need to pay other bills, save some (big?) for kids education/own retirement/rainy days, etc.)? In my book, we are talking about the income that would be AT LEAST 200k+ (and better, more like ~300k), to safely, and reasonably afford $400+k house - without stretching oneself too thin, or risking too much, or committing to a very lengthy mortgage (in which case, the cost of paying the interest, is not cost effective at all)

It is still not adding up in my book - but I might be wrong, sheeple might turn out to be happy to take on 50-years mortgages etc., that would make my points moot.

My point is, your average middle-class families cannot afford middle-class homes anymore - if we talking prudent financial planning, and not assuming/taking for granted, that their income "will increase in the future, and house value will increase, too". They cannot afford it TODAY, so they HOPE they will be able to afford it tomorrow. But hope is not prudent investing, IMHO.
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