I don’t agree with calculating the mean baased on historical median prices for last 80 years. Median or Mean are statistical estimators of a trend. However, it is common practice in statistics to ignore data beyond a certain sample window as that old data is considered “stale” and may skew the median/mean. The reason is because wars, taxes, economy,foreign investment, etc all make the dynamics of each cycle different.
A housing boom and bust cycle on avergae spans 13-15 years or 50-60 quarters. So I calculate mean based on median prices for each quarter, for the last 50 quarters. e.g. the tax changes PS described, benefited home ownership and added a premium over the mean for the next boom/bust cycle. This added premium bumped up the median for thuc cycle from the last cycle. Extrapolating a straight line from 97 would underestimate the true trend, as it ignores the tax premium existsed.
I think median will be around 400K in 2 years and that will be true reversion to mean. That is probably 370K in today’s dollar terms. But the downward momentum may push the median prices further below for sometime onwards.
