How much of the real fall in prices 1990-96 was due to a nominal fall in prices, and how much just due to inflation?
R. J., I think that, in this context, "real" means "inflation-corrected."
Kash, speaking of reality, the question I think is most interesting is prices in world terms. It's very nice if US stocks go up by x percent, but not so nice if the dollar declines by 2x percent. It means that goods imported from countries with appreciating currencies and travel to those countries cost more.
A post that I wish you would do is an estimate of what the value of the dollar would be if it were not treated as a reserve currency. I see the most likely path of adjustment to the twin deficits to be a decline in the dollar, since I think that will allow the global economy the least shock. The alternative, of large declines in nominal asset values, would be less efficient.
Excellent graphs (and for once, color impaired me can actually identify San Diego from Seattle) and I appreciate the note about the non-boom areas that are not immune from this correction.
In 2003? we saw foreclosure stats bump up in similar "not-so-hot" housing spots as the temporary stress then seemed to hit on areas one might identify as the "bedroom" communities for the generally "more well to do".
Only some of us can afford to be patient, it appears...and others positively stampedable. Given the outsized role housing has played in our not-so-diverse-as-all-that economy, I would say past housing busts are a very conservative guide to the next few months (yes not quarters, not years, you stampedables).
Kash - thanks very much. Excellent breakdown of the market. Particularly appreciate YOY% changes illustrative power on prices. Also the macro-pattern that jumpbs out of coastal vs inland cities makes a great deal of sense but is not one that anybody seems to have pointed out. Great micro-principles though - coastal land being scarcer and in more demand. Equally interesting is the point about very long-run pricing adjustments in the real estate markets. With several well-chosen charts you've highlighted several key, heretofore not widely notice, structural patterns in the RE marketspaces. Even works against my experiences - i.e. Devenr was going thru a mini-Internet/Telecom boom in the late 90s and what used to be open space when I visited years ago was getting rapidly filled in. But now ?
When I first looked at the OFHEO data, I was surprised that the y-o-y price increases continue at a robust, albeit diminished, pace in some coastal areas. Then I realized that the survey covers only a very small part of the market in coastal CA, where most mortgages are non-conforming. The survey also includes refinancings which tends to reflect the the loose lending and generous appraisal situation of last year. So the numbers could be changing quickly as the market further deccelarates and credit tightens.
How much of the real fall in prices 1990-96 was due to a nominal fall in prices, and how much just due to inflation?
Using 3% inflation, about half would be price declines (nominal terms) and half flat prices (only in real terms).
(That is, actual price declines would be in nominal+real terms.)
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