Massive 26% Markdown on Carmel Valley McMansion

[(former)FormerSanDiegan]

Housing prices may or may NOT follow the percentage of inflation, even in a healthy market. There are many factors that cause housing to go up when times are good and inflation is only one of them. I’ve read quite a few posts since I started reading this board where many a poster automatically figures in inflation when trying to determine where a house should presently be priced. I’m not saying that they’re absolutely wrong…..it’s just my opinion that they are. If “X” house was selling for $500k in 2001 and housing returns to 2001 levels, my opinion is that “X” house will most likely return to a price of $500k……NOT $500k plus the cost of inflation for the years between 2001-2008.

Over long periods of time inflation matters.
Indexing to inflation accounts for distortions in nominal dollar terms. Any economist worth his/her salt accounts for inflation. (Schiff does, Shiller does).

One could use prices, relative to incomes (as Rich does) to come up with perhaps a more relevant metric.

If one ignores inflation one might make the mistake of expecting prices to revert to where they were in 1965 when a SFR in Point Loma could be had for about $35K. After all the weather is not that much better now, is it ?

[Coronita]

Housing prices may or may NOT follow the percentage of inflation, even in a healthy market. There are many factors that cause housing to go up when times are good and inflation is only one of them. I've read quite a few posts since I started reading this board where many a poster automatically figures in inflation when trying to determine where a house should presently be priced. I'm not saying that they're absolutely wrong…..it's just my opinion that they are. If "X" house was selling for $500k in 2001 and housing returns to 2001 levels, my opinion is that "X" house will most likely return to a price of $500k……NOT $500k plus the cost of inflation for the years between 2001-2008. Reality has no rules and regulations when it comes to housing bubbles bursting and it IS and will continue to BE a buyers market for a long time. There is just way too much inventory and it's going to get a lot larger and there's going to be a shortage of good, qualified buyers with down payments and the desire to buy all of these properties unless they're severely discounted.

 

I'm also curious if this time around, the dollar's continued tumble will mean relative to other currencies. During the last RE bubble burst, did we see the dollar tank in similar percentages to what we're currently seeing now. It's looking pretty ugly.  

[img_assist|nid=5962|title=selfportrait|desc=|link=node|align=left|width=100|height=80]

—– Sour grapes for everyone!

[Coronita]

Housing prices may or may NOT follow the percentage of inflation, even in a healthy market. There are many factors that cause housing to go up when times are good and inflation is only one of them. I've read quite a few posts since I started reading this board where many a poster automatically figures in inflation when trying to determine where a house should presently be priced. I'm not saying that they're absolutely wrong…..it's just my opinion that they are. If "X" house was selling for $500k in 2001 and housing returns to 2001 levels, my opinion is that "X" house will most likely return to a price of $500k……NOT $500k plus the cost of inflation for the years between 2001-2008. Reality has no rules and regulations when it comes to housing bubbles bursting and it IS and will continue to BE a buyers market for a long time. There is just way too much inventory and it's going to get a lot larger and there's going to be a shortage of good, qualified buyers with down payments and the desire to buy all of these properties unless they're severely discounted.

 

I'm also curious if this time around, the dollar's continued tumble will mean relative to other currencies. During the last RE bubble burst, did we see the dollar tank in similar percentages to what we're currently seeing now. It's looking pretty ugly.  

[img_assist|nid=5962|title=selfportrait|desc=|link=node|align=left|width=100|height=80]

—– Sour grapes for everyone!

[Coronita]

Housing prices may or may NOT follow the percentage of inflation, even in a healthy market. There are many factors that cause housing to go up when times are good and inflation is only one of them. I've read quite a few posts since I started reading this board where many a poster automatically figures in inflation when trying to determine where a house should presently be priced. I'm not saying that they're absolutely wrong…..it's just my opinion that they are. If "X" house was selling for $500k in 2001 and housing returns to 2001 levels, my opinion is that "X" house will most likely return to a price of $500k……NOT $500k plus the cost of inflation for the years between 2001-2008. Reality has no rules and regulations when it comes to housing bubbles bursting and it IS and will continue to BE a buyers market for a long time. There is just way too much inventory and it's going to get a lot larger and there's going to be a shortage of good, qualified buyers with down payments and the desire to buy all of these properties unless they're severely discounted.

 

I'm also curious if this time around, the dollar's continued tumble will mean relative to other currencies. During the last RE bubble burst, did we see the dollar tank in similar percentages to what we're currently seeing now. It's looking pretty ugly.  

[img_assist|nid=5962|title=selfportrait|desc=|link=node|align=left|width=100|height=80]

—– Sour grapes for everyone!

[Coronita]

Housing prices may or may NOT follow the percentage of inflation, even in a healthy market. There are many factors that cause housing to go up when times are good and inflation is only one of them. I've read quite a few posts since I started reading this board where many a poster automatically figures in inflation when trying to determine where a house should presently be priced. I'm not saying that they're absolutely wrong…..it's just my opinion that they are. If "X" house was selling for $500k in 2001 and housing returns to 2001 levels, my opinion is that "X" house will most likely return to a price of $500k……NOT $500k plus the cost of inflation for the years between 2001-2008. Reality has no rules and regulations when it comes to housing bubbles bursting and it IS and will continue to BE a buyers market for a long time. There is just way too much inventory and it's going to get a lot larger and there's going to be a shortage of good, qualified buyers with down payments and the desire to buy all of these properties unless they're severely discounted.

 

I'm also curious if this time around, the dollar's continued tumble will mean relative to other currencies. During the last RE bubble burst, did we see the dollar tank in similar percentages to what we're currently seeing now. It's looking pretty ugly.  

[img_assist|nid=5962|title=selfportrait|desc=|link=node|align=left|width=100|height=80]

—– Sour grapes for everyone!

[Coronita]

Housing prices may or may NOT follow the percentage of inflation, even in a healthy market. There are many factors that cause housing to go up when times are good and inflation is only one of them. I've read quite a few posts since I started reading this board where many a poster automatically figures in inflation when trying to determine where a house should presently be priced. I'm not saying that they're absolutely wrong…..it's just my opinion that they are. If "X" house was selling for $500k in 2001 and housing returns to 2001 levels, my opinion is that "X" house will most likely return to a price of $500k……NOT $500k plus the cost of inflation for the years between 2001-2008. Reality has no rules and regulations when it comes to housing bubbles bursting and it IS and will continue to BE a buyers market for a long time. There is just way too much inventory and it's going to get a lot larger and there's going to be a shortage of good, qualified buyers with down payments and the desire to buy all of these properties unless they're severely discounted.

 

I'm also curious if this time around, the dollar's continued tumble will mean relative to other currencies. During the last RE bubble burst, did we see the dollar tank in similar percentages to what we're currently seeing now. It's looking pretty ugly.  

[img_assist|nid=5962|title=selfportrait|desc=|link=node|align=left|width=100|height=80]

—– Sour grapes for everyone!

[drunkle]

well, assuming inflation is a measure of the currency relative to other currencies, that would suggest that tradeable goods would reflect inflation.

wage inflation is then a reflection of increasing prices in traded goods; autos, for instance.

since the majority of americans work in services, they wouldn’t gain wage inflation since their services are locally traded.

and since homes are not traded across borders, they too are limited to local inflation plus whatever amount of foreign investment or immigration accounts for. i would think that that amount of influx would be significantly less than the the absolute amount of currency inflation (deflation).

[drunkle]

well, assuming inflation is a measure of the currency relative to other currencies, that would suggest that tradeable goods would reflect inflation.

wage inflation is then a reflection of increasing prices in traded goods; autos, for instance.

since the majority of americans work in services, they wouldn’t gain wage inflation since their services are locally traded.

and since homes are not traded across borders, they too are limited to local inflation plus whatever amount of foreign investment or immigration accounts for. i would think that that amount of influx would be significantly less than the the absolute amount of currency inflation (deflation).

[drunkle]

well, assuming inflation is a measure of the currency relative to other currencies, that would suggest that tradeable goods would reflect inflation.

wage inflation is then a reflection of increasing prices in traded goods; autos, for instance.

since the majority of americans work in services, they wouldn’t gain wage inflation since their services are locally traded.

and since homes are not traded across borders, they too are limited to local inflation plus whatever amount of foreign investment or immigration accounts for. i would think that that amount of influx would be significantly less than the the absolute amount of currency inflation (deflation).

[drunkle]

well, assuming inflation is a measure of the currency relative to other currencies, that would suggest that tradeable goods would reflect inflation.

wage inflation is then a reflection of increasing prices in traded goods; autos, for instance.

since the majority of americans work in services, they wouldn’t gain wage inflation since their services are locally traded.

and since homes are not traded across borders, they too are limited to local inflation plus whatever amount of foreign investment or immigration accounts for. i would think that that amount of influx would be significantly less than the the absolute amount of currency inflation (deflation).

[drunkle]

well, assuming inflation is a measure of the currency relative to other currencies, that would suggest that tradeable goods would reflect inflation.

wage inflation is then a reflection of increasing prices in traded goods; autos, for instance.

since the majority of americans work in services, they wouldn’t gain wage inflation since their services are locally traded.

and since homes are not traded across borders, they too are limited to local inflation plus whatever amount of foreign investment or immigration accounts for. i would think that that amount of influx would be significantly less than the the absolute amount of currency inflation (deflation).

[Ex-SD]

My main point was….when prices fall because a bubble bursts, they won’t conform to any type of restraints such as “X plus inflation=Y”. They will fall to what the marketplace is able and willing to pay.

[Ex-SD]

My main point was….when prices fall because a bubble bursts, they won’t conform to any type of restraints such as “X plus inflation=Y”. They will fall to what the marketplace is able and willing to pay.

[Ex-SD]

My main point was….when prices fall because a bubble bursts, they won’t conform to any type of restraints such as “X plus inflation=Y”. They will fall to what the marketplace is able and willing to pay.

[Ex-SD]

My main point was….when prices fall because a bubble bursts, they won’t conform to any type of restraints such as “X plus inflation=Y”. They will fall to what the marketplace is able and willing to pay.

[Author]

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