bostonbubble.com

[Renting in Mass]

I think the arguments for another 5% to 10% drop at the national level are compelling.

I wish there were equivalent charts for just Boston. I think we'd see that Boston has farther to fall to get back to the long term trend lines.

[admin]

[Renting in Mass]

You're good

It's the first chart that I'm particularly interested in. The runup to the peak matches the composite index very closely, but the fall from the peak is very different. The composite fell from 180 to 110, but Boston only fell from 180 to 155. Calculated Risk thinks the composite gets back to 100. If Boston is going to get anywhere near that number, we've got a long way to fall.

Any thoughts on why Boston would be different? Why would Boston mirror the composite on the way up but not the way down? Can Boston beat the reversion to mean that is so clear in the composite?

The futures show Boston achieving a permanently high plateau. I'm skeptical. I'll put my money on reversion to the mean every time.

[admin]

There are two important things that differ between the charts you're comparing. First, the Boston chart you linked to was actually the nominal chart. You should use the inflation adjusted version to have an equivalent of Calculated Risk's chart. The other major difference is the base time period. The (real) Boston chart is based such that the most recent month equals 100, but the Calculated Risk chart looks like they set January 2000 to 100. They probably did that to maintain the convention used by the S&P/Case-Shiller Indexes whereby January 2000 equals 100 in the nominal indexes, but that seems to me to be wholly arbitrary as a point for where prices should be. It looks like we would require a ~15% real decline to get back to January 2000 real prices, which is a lot closer to what Calculated Risk is predicting nationally.

- admin

[Renting in Mass]

[Renting in Mass]

I think I got the idea that 100 represented something from this chart from long ago.

Now that I look more carefully I see that 100 was just the arbitrary starting point here too.

So when Calculated Risk says he thinks index might get back to 100, he's not saying that because 100 has any particular significance, he's just pointing out that it looks like we're headed for 2001 prices, which happens to be the baseline for that particular chart.

Thanks for clarifying

[Renting in Mass]

Actually he's saying we're heading toward 2000 prices, which is the baseline.

[balor123]

[admin]