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I Love a Good Chart

This is from Chart of the Day who occasionally produce some interesting charts – although most of the time they are obscure things such as measuring GDP in gherkins The chart below is the  long term inflation adjusted median price of US housing.

Not only did housing prices increase at a rapid rate from 1991 to 2005, the rate at which housing prices increased — increased. That brings us to today’s chart which illustrates how the inflation-adjusted median home price is currently 38% off its 2005 peak. That’s a $100,000 drop. In fact, a home buyer who bought the median priced single-family home at the 1979 peak has actually seen that home lose value (8.5% loss). Not an impressive performance considering that more than three decades have passed. It is worth noting that the median priced home is currently in the bottom half of a price range that existed from the late 1970s into the mid-1990s.

I find this interesting not only because of my interest in the nature of bubbles and there persistence but also the nature of delusional behaviour. As an example the past few years have seen large numbers of real estate spruikers taking groups of investors to the US to buy depressed housing stock which from where I sit is a suicidal move.  Leave aside the nature of urban blight and the collapse of US heavy manufacturing which is exacerbating the collapse, the currency fluctuation alone has wiped these investors out. Assuming no further change in the value of the value of junk the doubling of the currency has effectively halved the value of your investment and any yield it generated.


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