In 2006, just as the Housing market was peaking, the NYT ran this graphic of the 100-year Case Shiller chart. It showed how radically overvalued Housing had become.
Two years later, TBP reader Steve Barry updated that graphic, including the projected Home Price mean reversion. (See versions for 2008, 2009 and 2010).
Its time to update this for 2011. Note the 2009 tax credit wiggle:
> click for larger version >
We plan to keep updating this annually until that mean reversion to fair value is achieved.
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Note: This chart has been liberally copied without identifying either the source or author. If you see this elsewhere on the intertubes, you should recognize that it was created by Steve Barry, and is originally published here at TBP.
This chart may be reproduced freely if appropriate authorship/publishing credit is given.
Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge. Also, be sure to create straw men and argue against things I have neither said nor even implied. Any irrelevancies you can mention will also be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.
Nice chart – thanks.
I know it’s adjusted for inflation but I’d love to see a log version.
The American public, or, an awful lot of them, still don’t get it:
http://pewsocialtrends.org/2011/04/12/home-sweet-home-still/
Watch for a lot of 4 sale signs to pop up on lawns soon, and disappear in a month or two this selling season. “What, this thing is worth at least 600 grand, and not a penny less!”
also, it’s interesting to hear, far too frequently, those that opine: ~”Housing(prices) should firm ‘in the next couple of Quarters’…we’ll be through ‘working off the Inventory’…continued Job Growth will provide a Bid..”
Good Gravy! If I wanted ‘bed-time’ Stories, I’d rather http://search.yippy.com/search?input-form=clusty-simple&v%3Asources=webplus&v%3Aproject=clusty&query=Grimm%27s+Faerie+Tales ~~
past that, nice work by Steve Barry.
Wha….you mean the bottom wasn’t in in 2009?
Here in Austin, housing has gone from insane back down to just silly.
I’m not sure if this chart doesn’t miss the rising “true” value of close in locations in growing urban areas.
I would like to see a least squares trend line of the data.
This looks pretty inflationary.
BR: 7 months ago I said we had another 30% downside in housing and you politely told me I was nuts.
What exactly is that chart saying???? Are you jumping on the housing is not done bandwagon>??????
furiouschads……..INFLATIONARY??? If anything it is stagflation at best. Housing assets continue to be a deflationary pressure on an economy where WHAT YOU NEED TO BUY is being forced by the invisible (BEN BERNANKE) hand higher for the good of the coutnry. You need to spend more save the economy…..or some kind of bullshit like that.
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BR: I do not recall saying you were nuts — but I have been saying homes (as measured by median income to median home price) are anywhere from 5-15% overvalued.
(Do you have a link to that ?)
And somebody tell me how the “starter” home market (isn’t that a product of the ponzi mentality of the 90s to ’06 – starter – move up – dream MacMansion?) will strengthen with student debt now at a trillion dollars and rising by the minute as the higher education bubble mimics the burst housing bubble. We now have a generation of kids starting adult life who may never be able to pay off their student debts before age 65 unless inflation just goes parabolic, or they all get hired by Goldman.
Size does matter. At the beginning of the last century, the average home was 700 to 1,200 square feet. Sure things were different at the beginning of the century. This plot does not take into account that between 1995 and 2005, the size of a typical new home increased nearly 20 percent. I would like to see this plot adjusting for median house size. I think this would be fairer representation when contrasting the last ~20-30 years.
So housing prices are 2/3 way thru their roundtrip assuming 1)they don’t undershoot on the way down,2) banks don’t accelerate their shadow inventory sales, 3)mortgage rates don’t rise from their recent record lows,4) local govs don’t raise property taxes to cover rev shortfalls 5) federal gov doesn’t mess with the mortgage deduction to cover rev shortfalls.
Off topic:
Barry, I saw you got a brief shout out in Matt Taibi’s latest rail against Wall St in RS, this time he’s tilling against the the ‘shadow budget’ of the Fed’s various non-recourse loan facilities, to anyone and everyone who didn’t need it, namely already well to do folks.
sorry forgot link for any interested.
http://www.rollingstone.com/politics/news/the-real-housewives-of-wall-street-look-whos-cashing-in-on-the-bailout-20110411?page=1
basically, he’s railing against the abuse of TALF by connected parties.
The chart sort of puts the lie to the concept of a house as a good investment outside of booms the price is fairly constant.
I suspect there is a second factor in the decline in the 1910s and 1920s the automobile, thereby increasing the supply of land for homes. Yes the electric street car had added areas to the suburban fringes of towns, but the distance one could build away from a streetcar line is limited to basically walking distance. With the coming of the auto the areas between the typically radiating lines in the outskirts of cities could be filled in, as well as going past the ends of the street car lines.
thanks for posting…
I would be interested in knowing the logic behind the “projection” (red dotted line)
Also, for those interested, I recently summarized the consensus of the MacroMarkets March Home Price Expectations Survey (~100 respondents):
http://economicgreenfield.blogspot.com/2011/03/macromarkets-march-2011-home-price.html
You still have those that have yet to default.
DC / N Virginia / Maryland are next to take a hit, imo. It’s still a highly overvalued market and has been pretty much immune thus far due to government and its spending. Obviously that is changing as we speak.
Two years later, TBP reader Steve Barry updated that graphic,
I wonder what ever happened to that guy. Very smart guy no doubt, but last time I recall he was still holding on to inverse market ETF position. I think that was early 09 around S&P 900. I can only imagine how far down that position would be now at 1300. FWIW, I’m still holding on to a small hedge position in SDS established around 1040 but it is less then 10% of the portfolio. I can’t even imagine the carnage if I had been 50, 75, or 100% in that the last 2 years.
I’ve been in this game now 15 years since finding the stock market after college at 21 years old. If there is absolutely one thing I’ve learned that is more important then anything else it is to have specific definable metrics to DEFINE THE TREND and never ever ever ever take big strategic positions against the trend. Whatever you think the “true fundamentals” are the market will have a way of making you look really stupid and taking your money. Although it is cliche, the truth really is “the trend is your friend”
[...] is an updated version of Case-Shiller’s housing index for the country. (The source for the updating and the image is The Big Picture and TBP reader Steve Barry.) It is of course [...]
You can clearly use this sort of pseudo-logic on all sorts of things…try plotting gold, or healthcare, or long distance telephony, or computers, or all sorts of things on this simple sort of inflation adjusted scheme. Explain the resultant weird story. Or put a big statement on top of the chart saying what you mean: Housing does not improve in quality and is a cash only purchase. That is what is implied by posting this chart and the attendant statements, so say it if you mean it. And if that isn’t what you really mean, then please explain, as I cannot see how you manage that logical contortion.
Here is my attempted logic (complaining is too easy). It has holes too, but I am trying to be reasonably self consistent.
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