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  • 12 Observations on Residential Housing [View article]
    Bio,

    I saw the same chart, and it reminded me of an expression that Milton Friedman said: "All aberrations revert to the mean." That's not a direct quote, but a paraphrase. In short, the aberrant runup in housing prices over the past 4 years is now reverting to the mean: A stable growth rate about 1% higher than inflation. Since inflation was averaging less than 2% annually over the past 4 years, but housing prices were rising at 10-40%, depending on where you measured it, to correct to the mean would call for housing prices to fall anywhere from 4%-35%, also depending on where you measure it.

    That's happening right now nationwide.

    As prices revert to their mean, further dislocations in the housing markets should be expected. But once this takes place, the next step is working off the excess inventory piled up while more houses were getting built than could be purchased.

    Look for housing's 'recovery' in 2012.
    Apr 30 19:22 pm |Rating: 0 0 |Link to Comment
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