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June 20, 2008


Pat Paulson


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?

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Perhaps Pat Paulson would like to eat crow?

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Wow! Great video. I agree with you, housing prices is exactly like a roller coaster.


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