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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Schnullie who wrote (49414)	3/3/2006 4:13:15 PM
From: gpowell	Read Replies (1) \| Respond to of 306849

Oh yeah? Try extrapolating the curve out to, say 2012, or 10 years beyond the 2002 data point. Well, I guess that's what I get for assuming a definition of a vague term like "blow up." Yes, a 5% growth in house pricing is unsustainable over the very long run, given a long-run income growth rate of approximately 2.5%. But, you might want to review this post on Baumol's desease though to see that housing need not track income growth exactly. Message 21966901 I would suggest these curves have nothing at all to do with California or other bubble markets, where these types of increases would apparently result in a median state home price of $1,000,000+ in 5 or 6 years. Certainly the data from which the charts are derived includes the bubble markets, but they aren’t a binding constraint on any market, nor are they a prediction of what will happen in the future. BTW, some areas of Silicon Valley have appreciated at a rate of approximately 12% per year since 1952. Also, the chart implies that the potential effects of kamikaze loans and speculative forces are just background and don't result in serious divergences from the long-term average. This is hard to imagine, particularly in the face of housing data over the last 6 months. They don't really. When faced with supply constraints the effect of increased market efficiency is to simply accelerate the rate at which prices reflect changing demands/utility. As for speculative activity one would have to assume that speculation causes out of equilibrium behavior, which effects the eventual equilibrium position of the market. That is possible, but not very probable without some other factors thrown in.