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Strategies & Market Trends : US Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: gpowell who wrote (22)	1/6/2006 2:21:47 PM
From: gpowell	Read Replies (1) \| Respond to of 97

Hopefully, we can appreciate from the preceding post that household balance sheets are within expectations, and we can turn to whether housing is in a bubble. And by bubble, we mean a price appreciation much higher than trend. Let’s look at this chart derived from data contained in the household balance sheet: i10.photobucket.com This chart shows the trend in house price since 1952. Does today’s price appear to be in a bubble, or is it rather a correction back to trend? In fact, what this chart shows is that it has taken over a decade for households to adjust their portfolios to the reality that we live in an era of low inflation - although it should be admitted that households might have delayed portfolio adjustments in favor of holding corporate equities through the 90’s. Be that as it may, what we have seen with house prices since 2001, is simply a portfolio adjustment and once the market realized (and expected) that we live in an era of low inflation - housing became cheap.