According to Robert Shiller's index of American housing prices going back to 1890, we are in the midst of a bubble of unprecedented proportions.
Now for some rough, back-of-the-envelope calculations:
Considering only data from the post-war period (which is probably more accurate and relevant), we can assume that the mean post-war housing value is somewhere between 110 and 120 on the index.
We know that all market values tend to revert to the mean, so what can we expect to happen in this case?
Based on these figures a rough estimate of a reversion to the mean would require housing values to decline approximately 40-45% from their 2006 value on this index.
5 comments:
Sure, the housing bubble is going to burst. But all real estate is local.
Different markets will react according to their own conditions. Some may fall by over 40% (think California, Florida), but most should be OK.
anonymous - your an idiot who is going to lose your a**. Wake up and dump your overpriced house. It is obvious you are trying to convince yourself of these facts. Everything is interlinked... the global economy, consumer spending, real estate, and your trailor in Arkansas.
johnb, you should learn how to spell "trailer" before you start calling people idiots.
It is absolutely unbelievable how Schilling, Mark Zandi and most of the country is being constantly destroyed by all this "irrational exhuberance" talk. All just because 10% of this country has doubled in price in the last 5-7 years or so. The biggest real estate bubble in the history of mankind is in India, where land prices in most cities have gone up 10 times to even a bizarre 100+ times just in the past few years.
Even condos that are not tied to land have gone up 5 times in the past few years. The prices there are more expensive than in most places in the USA, and yet the salaries there are far less. Yet none of our stupid "experts" comment on anything happening in such places and worry about a 10% increase somewhere within the USA. Now that is what is irrational.
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