Powayseller, while you are a good thinker and regularly provide excellent qualitative analysis, I don’t think you have “connected the dots” on how the current situation is 5 times worse than the last bubble. This article doesn’t help your position at all.
This article draws a random line and says “here is the trend.” The trend line takes 4 years of data, and extrapolates it out 20 years !!!!
I also think you have an inconsistency between your thinking that inflation is raging worse than the numbers show, but won’t affect housing or wages at all. Because if this, I’ll use a variety of inflation rates in my analysis below.
Lastly, the author needs to learn how to calculate growth based on a percentage.
The writer uses an inflation figure of 78% over 20 years, which is the same as 2.9% per year.
1.029 ^ 20 =~ 0.78%
He then incorrectly adds 20% because he assumes housing grows at 1% per year for 20 years (call it a “housing bonus”) over and above inflation.
To do it properly, you assume housing grows at 3.9% and multiply it by itself 20 times.
1.039 ^ 20 = 2.15
or up 115%, not 98%. This shows a reduction of 52%, not 56%.
Just getting started.
Now, using larger inflation figures – 5% (plus 1%) shows housing will only reduce by 30%. Using 7% inflation (with no 1% “bonus”) shows housing will actually increase by 4%. So, that government inflation figure, which is suspect, is very very important.
Oh – but wait. That is only in 2006
The author assumes an immediate reduction to the mean!! Idiotic! If it takes 7 years for the prices to adjust, the target price will grow. I get this for the year 2013:
