Columbo’s comments about taking this with a grain of salt are important, but it is a respectable bit of work and is the best picture we have at the moment to go that far back.
There are so many ways to analyze it incorrectly, I don’t think I’ll even try.
But – I will remind you: In 1997, the US government changed how home sales were taxed, which made home ownership more valuable because one could reap more cash from a sale, after tax. I believe some increase in prices are justified at this time.
I mean, if I buy a $200,000 house in 1996, thinking it will double in value by 2006, I can expect to make a $200,000 profit. But I have to pay %25 cap gains tax, so I only make $150,000 profit, over and above the sales price.
But in 1997, I can expect to make $200,000 when I sell it in ten years. This is a 33% increase in profit.
This means I would be willing to pay more, to the tune of $233,000 to purchase it and receive the same return. This is a 33% increase in the value of the home to all buyers, based only on the tax break.
Something to think about.
Powayseller isn’t allowed to like this graph cuz Schiller is from Yale and she doesn’t buy that Ivy League Stuff.
