leung_lewis: Have you seen this site’s graphs of median home price/per capital income? The data you describe is somewhat different than the data on this website. This site’s graph shows a period of decline from 1980 – 1986, followed by a rise to 1990. This data shows that every rise in prices reverts back to the mean, first overshooting it on the way down.
Prices cannot stay flat for years. Read the Bubble Primer. 80% of loans in SD last year were interest only. Those folks will be selling when their adjustable rates start to adjust.
“So history has shown that property price bubbles don’t necessarily burst like stock bubbles do. They perhaps merely deflate (as in the case of ’90-95).” leung_lewis: actually, the ratio of price/income went back to its trough level, which to me is a bursting.
Currently we are at med home pr/per capita inc = 14.5. To get back to the trough of 9, we would need a drop of 30%. Another chart shows home prices follow inflation. To revert back to that trend line, home prices must drop about 50%.
History has shown that property price bubbles correct. Look at Japan – they are in a 15 yr slump. Of course, it does not happen overnight, as with stocks. It can take many years. The SD correction can take 5 years.
What do the columns in the CM .xls file represent?
I closed escrow last week, and made some good money on my house (which we finished building in September 2005 and it was so gorgeous!). I am putting it all into CDs, and it will be there in its entirety for another home purchase at the trough of the market.
In the retirement account, there is more room to take risks. I heard of many people buying gold, but isnt’ that just speculation also? Since the money supply is no longer tied to gold, then gold is not really a substitute for money any more, and just another commodity, right?
I checked into ProFunds Short Real Estate Fund, and requested an Annual Report. The online Prospectus does not list their holdings. Shorting stocks and buying options can be risky, because you can lose more money than if you bought long. How about buying shares in companies that profit during recessions?
If you have a house, sell it. That’s the safest way to play this market.