Actually SD prices in 1998 were still below the long-term trend. They were 20% above their absolute low in 1995.
So, let’s compare from the prior low. Prices in 1998 were 20% above the prior low. If we return to 1998 prices in 2008, that would imply a 20% return over 10 years for an equivalent compounded annual rate of return of 1.84%.
Assume about 3.25 to 3.5% inflation, that’s negative 1.5% or so compared to inflation … COMPOUNDED ANNUALLLY.
Over 10-13 years, that would be about 15-20% cumulative negative return relative to inflation.
So, when you say that prices will return to 1998 levels, what you are saying is that housing prices will deflate by 15% in real terms BELOW the prices observed in 1995 at the previous cycle bottom .
