What would be the factor causing a new shift to higher prices? To me, wages would be an obvious factor. If we had inflation, and wages went up 30%, then housing prices would be cheap, and people would keep buying. Problem solved.
If I had to consider the effect of wages on future housing prices, I see a greater likelihood of flat wages for decades, supporting the case for housing prices to fall. Global trade and competition from low-wage countries, and illegal immigration have kept our real wages flat for 7 years.
Housing prices are dependent on wages and employment. So if there were a sudden shift to more high paying jobs, housing prices would increase. But this argument I provide does not answer your well-made point about a permanently higher plateau. Rising wages could allow housing prices to stay high, because the multiple of 7 is maintained.
What has increased the multiple today? Loose lending practices. If loose lending became permanent, then the multiple would stay higher.
I’m sorry I didn’t read the book yet, but could you tell me in layman’s terms what caused stock market valuation to shift to a higher level, and if that shift is indeed permanent.
What do you mean with the difference between the sample mean and population mean? The sample mean is the houses that were sold. Do you think that the types of homes sold over the last 5 years is skewed? Perhaps, to bigger homes. New homes today are much bigger, skewing the median upward. We sell 30K – 40K homes a year in a city of 1.1 million homes, so those annual home sales are setting the price for the entire city. But nobody selected which homes could be sold, so nobody influenced the sample mean. I don’t see the point. We are not selecting a sample (as the pre-med students), but measuring transacations over time. So there is no influencing of the sample.
To date, has any bubble ever corrected to a new mean? This is the Grantham challenge I noted above.
A wonderful disccusion, but I think it is a disguised version of “This time is different, because the mean was not properly determined, or the mean will change because this time is different.” Burden of proof is on you, edna.
