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Thursday, December 20, 2007


house prices changes

from OFHEO is a tidy little utility for comparing nominal house price changes using their database. the data require a deflator to be translated into real terms. as a method of estimating the size of local house-price bubbles, it can join local estimates of price-to-rent and price-to-income in giving ballpark estimates of what to expect as things normalize with the return of something like credit underwriting standards.

as it stands, from current prices, median-price-to-median-income looks set to revert some 30-35% to get back to its pre-2002 standard, while price-to-rent looks more like a 25% reversion to get back to 2001 levels. paul krugman, on similar grounds, is expecting a national 30% reversion -- and that ignores the possibility of overshoot in reversion.


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