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History of Home Prices Since 1890
Old 04-21-2007, 06:21 PM   #1
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History of Home Prices Since 1890

What does this look like?

http://www.speculativebubble.com/images/homevalues1.gif

Can not attach - gif to large.
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Re: History of Home Prices Since 1890
Old 04-21-2007, 07:47 PM   #2
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Re: History of Home Prices Since 1890

rational exuberance?

i like charts that factor in population growth (immigration) + low interest rates (money from china) + an increase in household income over time... all of these should be expected to push adjusted prices higher
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Re: History of Home Prices Since 1890
Old 04-21-2007, 08:01 PM   #3
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Re: History of Home Prices Since 1890

Quote:
Originally Posted by macdaddy
rational exuberance?
1997 was when capital gains up to 250K per person started (I believe).

That chart is not normal and it will correct sharply.

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Re: History of Home Prices Since 1890
Old 04-21-2007, 08:14 PM   #4
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Re: History of Home Prices Since 1890

It's hard to tell withoutmore detail, but I wonder if things like house size and features are taken into account.
I would guess that the average house today is more than twice the square footage of the average house in 1890.


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Re: History of Home Prices Since 1890
Old 04-21-2007, 08:21 PM   #5
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Re: History of Home Prices Since 1890

Quote:
Originally Posted by sgeeeee
It's hard to tell withoutmore detail, but I wonder if things like house size and features are taken into account.
I would guess that the average house today is more than twice the square footage of the average house in 1890.
And commonly includes indoor plumbing, modern cllimate control, insulation, more and better windows, etc. nowadays.

Here come the hedonic adjustment haters...
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Re: History of Home Prices Since 1890
Old 04-21-2007, 08:21 PM   #6
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Re: History of Home Prices Since 1890

i am very familiar with two areas, southern california and boston. so cal is about 20% overvalued and boston is about 10% overvalued. i don't think we'll ever see close to 100 on that chart unless unemployment moves above 10% and people can't pay rent. at somewhere around 140-150 on that chart, properties become cash flow positive as rentals with no money down (in boston). in so cal, thanks to prop 13, the vast majority of people will just pull their properties off the market and let them sit. you can't tax them out. i think we're in for some more declines + a few years of inflation that will make the market healthier, but not the crash that everyone wants to see.

and as others pointed out, houses are a lot nicer now... people seem happy to pay 50% of their combined income for them...

where else would people invest their money anyway, if not in real estate... i thought the stock market was capped out at an all time high?
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Re: History of Home Prices Since 1890
Old 04-21-2007, 08:56 PM   #7
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Re: History of Home Prices Since 1890

if you believe in the K wave theory which does sound very intersting, 1890 is a bad year to compare to current values. if you choose a different year when times were better current times may not be so bubblish

http://en.wikipedia.org/wiki/Kondratieff_Cycle
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Re: History of Home Prices Since 1890
Old 04-22-2007, 01:39 AM   #8
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Re: History of Home Prices Since 1890

Looks to me like the CO2 chart that people trot out for global warming....


I would say that there is a higher demand for that house in Boston today than in 1890... or for that matter any other year on the chart.. it does say they are tracking housing that has been around for the whole time...
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Re: History of Home Prices Since 1890
Old 04-22-2007, 04:12 AM   #9
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Re: History of Home Prices Since 1890

Quote:
Originally Posted by PPT
What does this look like?
Looks to me like its different this time...
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Re: History of Home Prices Since 1890
Old 04-22-2007, 08:03 AM   #10
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Re: History of Home Prices Since 1890

I'm not sure about the value of the chart considering the changes that some have mentioned but one of the most important is the change in mortgage practices

Prior to the Great Deprecision mortgages were no longer than 5 years. It was changed in the 1930 to 30 years in an attempt to get the economy moving.

Population Growth and pent up demand is another factor - in the 1960s the US poplulation was apx 200 million now 300 million BUT more important is that the number oh home buyers increased at a greater proportion. Think baby boomers.

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Re: History of Home Prices Since 1890
Old 04-22-2007, 10:45 AM   #11
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Re: History of Home Prices Since 1890

With the surge in Baby Boomers also comes a surge in that percentage of buyers who buy more house than they can really afford. And lots of mortgage companies happy to accommodate them with ARMS and "interest-only" loans that keep their payments down while they get to live in a house with lots of bells and whistles and square footage.

There's probably a bubble. Probably not as big a bubble as that chart suggests, since all the other factors mentioned here also play a part. But a bubble. So what do we do to protect our assets?
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Re: History of Home Prices Since 1890
Old 04-22-2007, 11:14 AM   #12
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Re: History of Home Prices Since 1890

The surge is the speculative bubble that was fuelled by
1) Extraordinarily low interest rates
2) Liberal lending practices
3) Stock market meltdown in dotcom, tech and telecom
4) Speculation by average investors
5) Many people believing the ride will never end.

Or maybe we have ventured into some kind of new economy.
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Re: History of Home Prices Since 1890
Old 04-22-2007, 11:29 AM   #13
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Re: History of Home Prices Since 1890

Sure looks bad. Of course, if I'd seen this curve at the end of 2001, I'd have said a correction was imminent (IOW you never can tell):
Attached Images
File Type: jpg Through2001.jpg (17.1 KB, 17 views)
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File Type: jpg_thumb Through2001.jpg_thumb (14.8 KB, 0 views)
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Re: History of Home Prices Since 1890
Old 04-22-2007, 05:57 PM   #14
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Re: History of Home Prices Since 1890

With indicators like "Flip this House" (A&E Channel) and "Flip that House" (TLC Channel)........

They are talking about this on the Vanguard board. Thought some would find interesting.....

http://www.diehards.org/forum/viewtopic.php?t=1912

Note: If it is not kosher to link to other boards please delete.
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Re: History of Home Prices Since 1890
Old 04-22-2007, 06:00 PM   #15
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Re: History of Home Prices Since 1890

Quote:
Originally Posted by TromboneAl
Sure looks bad. Of course, if I'd seen this curve at the end of 2001, I'd have said a correction was imminent (IOW you never can tell):
I just do not see how housing prices can outpace wage growth so greatly.

I would hate to be a 18 year old looking for a place to live now.
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Re: History of Home Prices Since 1890
Old 04-22-2007, 06:43 PM   #16
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Re: History of Home Prices Since 1890

Quote:
Originally Posted by PPT
I just do not see how housing prices can outpace wage growth so greatly.

I would hate to be a 18 year old looking for a place to live now.
Am I missing something? I don't see why you assume that house prices are outstripping wage growth. Does anyone have more description of what Shiller is actually plotting here?

http://measuringworth.com/calculators/uscompare/

It looks to me like wage growth has outstripped inflation by more than a factor of 5 over this period. Yet if I understand Shiller's plot, housing cost has only doubled compared to inflation.
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Re: History of Home Prices Since 1890
Old 04-22-2007, 07:52 PM   #17
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Re: History of Home Prices Since 1890

i'd say in the last 10 years housing has easily outstripped wage growth
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Re: History of Home Prices Since 1890
Old 04-22-2007, 08:08 PM   #18
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Re: History of Home Prices Since 1890

Quote:
Originally Posted by sgeeeee
Am I missing something? I don't see why you assume that house prices are outstripping wage growth.
From the Federal Reserve Bank St Louis Federal - released April 2007:

Quote:
Homeowners enjoyed an average increase of 54.4 percent in the value of their houses between 2001 and 2005
http://www.stlouisfed.org/publicatio...ges/slump.html

I would say in my neck of the woods housing prices appreciated another 10-12% in 2006.

I can safely tell you my salary did not go up 54.4% from 2001 to 2005.
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Re: History of Home Prices Since 1890
Old 04-22-2007, 08:29 PM   #19
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Re: History of Home Prices Since 1890

Quote:
Originally Posted by PPT
I can safely tell you my salary did not go up 54.4% from 2001 to 2005.
From 2001 to 2005 my wages went up 12.2%.

Only 42.3% away from beating the average residential home. Hell, I would be happy with a tie.

Glad I am not comparing myself to an office building or I would really be bummed out.


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Re: History of Home Prices Since 1890
Old 04-22-2007, 09:47 PM   #20
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Re: History of Home Prices Since 1890

Quote:
Originally Posted by al_bundy
i'd say in the last 10 years housing has easily outstripped wage growth
Yeah, if you break down the period of the OPs original chart, here's what you find:

1890 to 1994
CPI went up 1580%
unskilled wages went up 7943%
housing went up 10%

then from 1994 to 2005
CPI went up 32%
unskilled wages went up 42%
housing went up 81%

So if you only look at the last decade, you can find reason to worry.



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