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

To: Moominoid who wrote (56276)	6/18/2006 10:57:03 AM
From: John Vosilla	Respond to of 306849

But over time costs of construction and renovation continue to go up and usually far outstrip depreciation and obsolesence of a used home.

To: Moominoid who wrote (56276)	6/18/2006 1:23:43 PM
From: Metacomet	Read Replies (1) \| Respond to of 306849

Elroy will tell you they rise at exactly at the rate of growth in nominal income (I think). I don't know Elroy, and he doesn't understand the real estate market. There is a statistic called the "affordability index". Basically it relates the cost of housing to income. If friend Elroy is suggesting that this value is a constant, he's behind in his research. According to the latest reading on this metric, we are seeing a situation where there is a marked rise in the number of people who can't afford to buy a home. Intuition suggests that since real wages are static to declining, no increase in house prices is supportable, and yet we were seeing record rises in rates of appreciation as well as sales prices. So increased earnings are not accounting for the increases in prices. A more likely culprit is inflation as measured by a decline in purchasing power of the dollar. This was exacerbated by monetary policy that held the rent charged on money to an artificial low. An interest rate regime that the current imbiciles have kept in place to mask the economic damage being wrought by nonsensical supply side policies designed to transfer wealth to the already rich.