Housing Bubble: Two-Thirds of the Way Back to 2000

Via Calculated Risk, Case-Shiller indices (10 and 20 city composites) show that, adjusted for inflation, we have given back two thirds of the peak relative to 2000.

click to enlarge

Here is the last 100 years:

International comparisons (not inflation adjusted):

Comments

[efbdergraf:]

Whether Case-Shiller is perfectly accurate is of little importance. It is enough to know that historically housing costs (after to food the most essential of human needs) have tracked but seldom outpaced inflation. A roof was always a necessity and with the exception of specific markets not considered fair game to speculation. Greenspan's free money and Bush's no-tax but mega-government expenditures and deficits only encouraged speculation and rampant greed amongst citizens, contractors, brokers and bankers. Wrong-headed legislation sought to correct that by creating the "sub-prime" category of buyers rather than closing the money spigot. Poorer or otherwise unqualified people were given keys with no downpayments or legs - but ARMs. Legitimate wage-earning families were squeezed out and deprived of reasonable cost housing. The only long-term remedy is to allow the market auction mechanism to rediscover the "right" price - probably not far from where normal inflationary pressures would have evolved after 2001. Trying to protect unqualified "owners" will only prolong the agony.

2008 Oct 29 09:39 AM

[John Preston:]

actually, if you review the HPI from OFHEO, housing prices since the early 1960's have out paced inflation by around 50%....

ave inflation = +/-4.25%...

ave housing appreciation - +/- 6.25%

BTW...the market dynamics were screwed up...beginning the mid-1990's...and continuing up to today....there is no real housing market because the credit guidelines keep changing....for a true market to exist, there needs to be stable credit parameters....there was a credit manipulation on the way up...for 15 years....and there is a credit manipulation today....on the way down..

This is not a market...

2008 Oct 29 09:53 AM

[Boubou:]

Credit and tax changes brought about a property crash in uk in or around 1990. I bought a spec house at the peak unable to watch the soaring prices any longer.
The price returned to my purchase price in 10 years , so watch out.
A house has to cost 3 to 4 times the aspiring owners income.
When it gets a lot higher, even W should be able to see the crash coming.


I've managed this several times including the tech bubble of 2000.
I had professional help to screw that one up.
I say ' if you've missed the boat then jump into the water and sink'.

2008 Oct 29 10:50 AM