Bugs – I was simply responding to jg’s argument, which was based on national figures.
You are right, the shorter the period you consider, the more sensitivity you have to interest rate movements.
My general point is that housing prices are not immune from inflation over longer periods, however, I concede that short term price movements are correlated with change in rates.
My argument is simple (and circular): Higher prices (inflation) result in higher prices.
Incidentally, the changes in 1975-1982 time frames were due in part to the changes in the tax code, and in California, due to the effects of Proposition 13. Tying property taxes to purchase prices rather than to market value had a huge effect over the long term to the pricing structure.
I believe that the changes were because higher inflation means higher prices, not due to Prop 13 or other tax code changes. How does the Prop 13 affect prices to the upside? I would argue that Prop 13 suppresses prices by reducing a potential pool of buyers. This pool of buyers are people who are reluctant to move out of their low cost-basis property because they are paying significantly lower property taxes than if they moved. I know several people who would consider moving, but do not want a $500 – $600 per month increase in their property taxes.
What other tax code changes were enacted in 1975-1982 ?
