yes, unlawfulcombatant, that is what I meant. Specifically I had in my mind something like jg’s chart of the OFHEO index, which is an index that tracks the percent change in housing prices (resales and refinances of single family homes financed by Fannie Mae, so under the conforming loan limit, fixed rate mortgages). We can visualize pretty much a straight line for 3 decades, and then in 2000 we see a divergence. I’m not sure why some are arguing about this, as it is pretty clear that we have a trendline going back 30 years.
If someone would like to make a case for a permanently higher plateau, the burden of proof is on them. Why should the median be higher now; what fundamental factors support higher prices? In my opinion, the current housing prices are unsustainable, because people need artifically low teaser rates just to afford a home, and are spending up to 50% of income on housing. A true higher plateau would require wage increases or tax benefits, to allow people to afford the higher prices. The 1997 tax law change did not make any difference in 1997, 1998, or 1999. We also see a huge spike in 2003, when exotic loans became popular. So the rise in prices is linked to the 1% federal funds rate, not to a tax law enacted many years before. I am checking with my CPA about the impact of the tax law on the housing market. It is a very good point that was raised.
