Housing Prices Plotted as a Roller Coaster

Some of you have likely seen this before, oft-forwarded via email as it was, but it bears another look with a fresh set of eyes.

It's a video made in early 2007 by one of those pesky interweb bloggers that plots inflation-adjusted U.S. housing prices as a roller coaster, painting a visceral picture that helps explain why prices had to come down and finally did. Remember: these are inflation-adjusted prices, which means that any home price gains that were dead-even with inflation would be flat. With that in mind, the immense upward trajectory of this thrill ride highlights just how much faster home prices grew than other consumer goods did during the last 10 years -- an unsustainable trend to say the least.

It would be fun to see this updated through today's data.

*Note: keep an eye on the lower right corner under the little YouTube icon for occasional updates on what year in history the roller coaster is at in it's journey.

Check it:

Comments

[Pat Paulson]

Jeff,

I think this roller coaster is just another of Robert Shiller's scare tactics to get more people to buy into his real estate hedge fund, betting housing prices will decline. Although we must admit that the excess of housing appreciation over inflation is a legitimate argument for price declines, there are some points worth noting. First, if one can make the case that house prices can be too high relative to other goods and services, then the opposite could also be true. Perhaps house prices were too low before the boom and then caught up to where they should be or went slighty over. As I recall, almost every house and duplex in the low to median price ranges had the potential to significantly cash flow during the early to mid 90's. Second, the official inflation measure, CPI, has been watered down since 1983. Technological improvements are factored out of most products in the "basket of goods". And home price increases aren't even included in the calculation, despite being most peoples's largest expense. To measure housing expense, they take a survey, asking homeowners what they think their house could rent for. By comperison, house appreciation includes all the renovations, and higher tech/quality new construction. It's not an apple to apple comparison.

Keep up the good work! Love "The Skinny"

[Roller Coaster]

Perhaps Pat Paulson would like to eat crow?

[buy eve isk]

Perhaps Pat Paulson would like to eat crow?