I’m reading a lot of crowing about a housing recovery based on the year-on-year improvement in the Case-Shiller index as of January 2013. Quite a few people are reproducing one of the charts from that post, the one that shows a sharp recovery in the percentage increase over time.
The same release, linked above, has another chart in it and I’ve reproduced that one here. As you can see it shows the increase in housing prices from 1987 to date. Does that look like a recovery to you? Prices are back where they were in 2003. Whoopee. Happy days are here again. Of course, the value of the dollar as measured, say, in how much healthcare or education you can buy with it isn’t quite the same as it was in 2003.
Another aspect of the chart bears mentioning. To my eye it looks as though we can trace the housing bubble to some time in 2002 (there’s an arguemnt for the late 90s, too). That would mean that housing potentially has another twenty or thirty percent to give up before the effects of the bubble are fully dissipated. Offhand I’d say that the only thing that would save us from that would be the increase in the population over the last decade. Of course, today’s first time home buyers don’t have nearly as much money to spend as the typical seller. That couldn’t possibly put any downwards pressure on prices, now could it?