Are We Close to Bottom?

[fun4vnay2]

The bottom is yet to come.
Keeping in mind the state of economy and unemployment rate, I see housing prices going nowhere but down..

[patientrenter]

[quote=jdsuowner]If the price of this home was about $250K in 1996-1997 and normal(?) appreciation were to continue to 2011 what do you think the house would be worth today given there was no bubble? Was appreciation normally 4-7%?[/quote]

In the long run, home prices follow incomes or prices in general. Robert Shiller and a few others have done extensive studies of home price changes over long periods, in many locations. His conclusion was that home prices eventually follow general price levels (matching the general inflation measures).

I think it’s arguable that prices might follow household income, which grows more quickly than consumer prices over long periods. Since 1996, the CPI has increased 40%, and household incomes have increased more. My crude estimate was 70%.

Increases of 4-7% a year are unsustainable. That would require average annual increases in real household income of 1-4% annually over long periods, if we assume 3% consumer price inflation. That kind of growth in real income might happen in China, but not in the US.

[patientrenter]

[quote=jdsuowner]If the price of this home was about $250K in 1996-1997 and normal(?) appreciation were to continue to 2011 what do you think the house would be worth today given there was no bubble? Was appreciation normally 4-7%?[/quote]

In the long run, home prices follow incomes or prices in general. Robert Shiller and a few others have done extensive studies of home price changes over long periods, in many locations. His conclusion was that home prices eventually follow general price levels (matching the general inflation measures).

I think it’s arguable that prices might follow household income, which grows more quickly than consumer prices over long periods. Since 1996, the CPI has increased 40%, and household incomes have increased more. My crude estimate was 70%.

Increases of 4-7% a year are unsustainable. That would require average annual increases in real household income of 1-4% annually over long periods, if we assume 3% consumer price inflation. That kind of growth in real income might happen in China, but not in the US.

[patientrenter]

[quote=jdsuowner]If the price of this home was about $250K in 1996-1997 and normal(?) appreciation were to continue to 2011 what do you think the house would be worth today given there was no bubble? Was appreciation normally 4-7%?[/quote]

In the long run, home prices follow incomes or prices in general. Robert Shiller and a few others have done extensive studies of home price changes over long periods, in many locations. His conclusion was that home prices eventually follow general price levels (matching the general inflation measures).

I think it’s arguable that prices might follow household income, which grows more quickly than consumer prices over long periods. Since 1996, the CPI has increased 40%, and household incomes have increased more. My crude estimate was 70%.

Increases of 4-7% a year are unsustainable. That would require average annual increases in real household income of 1-4% annually over long periods, if we assume 3% consumer price inflation. That kind of growth in real income might happen in China, but not in the US.

[patientrenter]

[quote=jdsuowner]If the price of this home was about $250K in 1996-1997 and normal(?) appreciation were to continue to 2011 what do you think the house would be worth today given there was no bubble? Was appreciation normally 4-7%?[/quote]

In the long run, home prices follow incomes or prices in general. Robert Shiller and a few others have done extensive studies of home price changes over long periods, in many locations. His conclusion was that home prices eventually follow general price levels (matching the general inflation measures).

I think it’s arguable that prices might follow household income, which grows more quickly than consumer prices over long periods. Since 1996, the CPI has increased 40%, and household incomes have increased more. My crude estimate was 70%.

Increases of 4-7% a year are unsustainable. That would require average annual increases in real household income of 1-4% annually over long periods, if we assume 3% consumer price inflation. That kind of growth in real income might happen in China, but not in the US.

[patientrenter]

[quote=jdsuowner]If the price of this home was about $250K in 1996-1997 and normal(?) appreciation were to continue to 2011 what do you think the house would be worth today given there was no bubble? Was appreciation normally 4-7%?[/quote]

In the long run, home prices follow incomes or prices in general. Robert Shiller and a few others have done extensive studies of home price changes over long periods, in many locations. His conclusion was that home prices eventually follow general price levels (matching the general inflation measures).

I think it’s arguable that prices might follow household income, which grows more quickly than consumer prices over long periods. Since 1996, the CPI has increased 40%, and household incomes have increased more. My crude estimate was 70%.

Increases of 4-7% a year are unsustainable. That would require average annual increases in real household income of 1-4% annually over long periods, if we assume 3% consumer price inflation. That kind of growth in real income might happen in China, but not in the US.

[jpinpb]

Inflation calculator might help.

[jpinpb]

Inflation calculator might help.

[jpinpb]

Inflation calculator might help.

[jpinpb]

Inflation calculator might help.

[jpinpb]

Inflation calculator might help.

[Jazzman]

I’d say we are closer to the bottom. The last cycle took about six years, and was nowhere near as severe. Case Shiller resales prices are declining, median prices are declining, and many of the brokers I speak to are hanging in there, but have their reservations about where things are going. Rates may be very low, but many argue it’s better to buy at a lower value and higher rate. If, as someone has suggested, rates do spike then prices will resume a downward trend, putting off a recovery until a much later date.

[Jazzman]

I’d say we are closer to the bottom. The last cycle took about six years, and was nowhere near as severe. Case Shiller resales prices are declining, median prices are declining, and many of the brokers I speak to are hanging in there, but have their reservations about where things are going. Rates may be very low, but many argue it’s better to buy at a lower value and higher rate. If, as someone has suggested, rates do spike then prices will resume a downward trend, putting off a recovery until a much later date.

[Jazzman]

I’d say we are closer to the bottom. The last cycle took about six years, and was nowhere near as severe. Case Shiller resales prices are declining, median prices are declining, and many of the brokers I speak to are hanging in there, but have their reservations about where things are going. Rates may be very low, but many argue it’s better to buy at a lower value and higher rate. If, as someone has suggested, rates do spike then prices will resume a downward trend, putting off a recovery until a much later date.

[Jazzman]

I’d say we are closer to the bottom. The last cycle took about six years, and was nowhere near as severe. Case Shiller resales prices are declining, median prices are declining, and many of the brokers I speak to are hanging in there, but have their reservations about where things are going. Rates may be very low, but many argue it’s better to buy at a lower value and higher rate. If, as someone has suggested, rates do spike then prices will resume a downward trend, putting off a recovery until a much later date.

[Author]

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