Lost Cat, I think you have the right concept but your timing is skewed IMO. Here’s why, and I don’t mean to be contentious:
You’re comparing the turn around time of a stock bubble with an asset (housing) bubble. Stocks can be sold, go up, go down, or be purchased in a single day, sometimes multiple times. Physical assets like a house take months to do the same if not longer.
With inflation rising, i just can’t see today’s prices looking out of touch or even expensive in 5 years from now.
No doubt inflation is rising, but inflation is a measure of costs, not ability to pay for those costs. For that you have to look at incomes. Incomes have been stagnant if not down for the past 3 years where economic growth has been at all time highs. The translation there is wealth is not filtering down into the middle class. There’s an MSN article today on CEO’s making 364 times what you do.
Go to Zillow, accurate or not, and pick a house in your zip code. Go to graphs and look at the pre-2004 and post-2004 trends. Then follow the line from pre-2004 until it reaches the level of pricing today. My guess is it will take you well off the graph to about 2020. The point is prices cannot stay this high while incomes catch up.
And think about it, a house is like anything you buy. It wears out, get olds, breaks down, requires maintenance, repairs, fresh paint, the whole 9. But we know over the long term prices go up, while things like cars, that do the same thing typically go down. So why do houses go up? It’s because incomes do and nothing else. Dramatic increases and decreases are the result of other circumstances like the credit nightmare of the past 3 years, but over time housing has no choice but to track with what people can afford. The question is can prices hold out for the 10 years or more while incomes catch up. Factor in today’s credit market, declining wages and increasing layoffs, and the obvious answer is no way. Prices have a long way to come, and it will slow and painful.
