Monday, November 26, 2012

D-O-D: Decade-OMG-Decade Edition

The previous post showed why Case-Shiller wasn't a useful metric on their own terms. I did not even go to the myriad reasons why "same pair" is totally broken as a baseline.

Now it is time to push the idea beyond speculation to investment time frames. 10 years. Okay, that's lame. I should use 8 years as the typical residency or refinance period. I could also go shorter with recent trends of the same. 10 years is nice and round. Okay, pie are round. [rimshot] 10 years is easy. Feel free to do something harder.

Ten year C-S valuations 2002-2012:
C-S Composite 10  116%
C-S Composite 20  111%

Since 2002 houses have lagged inflation.  There's no chance they will beat inflation for at least another 10 years.  

That needs an explanation.  Within five years house prices would need to exceed peak 2006 prices ande then continue to pace inflation.  Not_going_to_happen.  





9 comments:

sm_landlord said...

" Within five years house prices would need to exceed peak 2006 prices and then continue to pace inflation. Not_going_to_happen."

Dunno, the FHA is still pumping money out there. If they keep it up for another five years, amazing things could happen. They're already making loans to serial deadbeats that blew up in the last bubble.

Also, as much as the local used house salespeople cry about lack of supply, there are houses coming on the market here in the off season. It's almost as if some thing or some one is is metering the supply. The market is being gamed, and not in a downward direction.

Thomas Stone said...

SM Landlord, I agree that it seems like inventory is being metered and that the market is being gamed in an attempt to keep prices high. I don't think it will work. I believe that location will become more and more important, it's wise to distinguish which market you are discussing as clearly as you can. Calvinball is not as predictable as I would like.

Rob Dawg said...

I am sure it [metered inventory release] will not work. Investor or occupier, there just is not enough demand. The price point for demand is also likely to ignite a rapid bubble. From that perspective limiting supply seems the safer course.

Cinco-X said...

sm_landlord said...
Dunno, the FHA is still pumping money out there. If they keep it up for another five years, amazing things could happen. They're already making loans to serial deadbeats that blew up in the last bubble.

FHA pumping won't make up for lack of increases in real wages, and for that matter, neither will QEx, Operation twist and Shout, et al

TJandTheBear said...

Yep, market is floating on the fact that the limited number of capable buyers exceed the extremely limited inventory. Keep in mind "capable buyers" means all those yield-chasing investors out there, which hardly constitute a remotely normal buyer pool.

There was an article the other day about wealthy Angelenos flipping high-end properties. We're definitely in an echo bubble.

Rob Dawg said...

I get more out of a half dozen thoughtful comments here than I do filtering a thousand random options on some other sites. Thank you all.

Jim the Realtor said...

No chance?

Would you like to place a wager on that? How about a cup of coffee?

The regional numbers are too noisy, fraud and deceit is everywhere, and case-shiller sucks.

Let's pick a specific zip code.

My assertion:

Detached homes in 92130 will be back to 2006 pricing by September, 2014.

Sept 2006: 32 sales, $370/sf.
Sept 2012: 43 sales, $326/sf.

Glad to see EN is back!

Jim the Realtor said...

Here is the link to redfun 92130 stats:

http://www.redfin.com/zipcode/92130

Rob Dawg said...

Hey Jim, good to see you sir.

What? Finally ran out of the coffee you won last time? What was that, 2007?

I'll look at your bet and put up a post. as i recall you "won" the bet last time by a nose. One more month of declines and I'd have won. Looks like you might have a point though about 92310. Like any bet in real estate, let me do my due diligence.