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Boston Bubble Report: MA Housing vs. Income 1984 - 2006
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PostPosted: Thu Oct 04, 2007 8:30 pm GMT    Post subject: Boston Bubble Report: MA Housing vs. Income 1984 - 2006 Reply with quote

Possibly one of the most important fundamentals in determining what a property is worth is the income of those living in the area. Employment and business opportunities vary geographically and people would logically be willing to pay more to live in areas with better income opportunities. Income is also the source of the money used to purchase housing and as such limits the extent to which housing prices may rise over the long term. While such a limitation may be overpowered for periods of time by factors such as aggressive financing and temporarily low interest rates, in the long term prices must be sufficiently supported by income.

A simple method of determining how well housing prices are supported by incomes is to calculate the ratio of sale prices to incomes and compare the ratio from different time periods. While this does not provide an intricate model detailing exactly how incomes affect prices, it does illuminate how much income has been necessary in the past to support housing prices as well as when prices rose beyond what was sustainable for the long term. A plausible hypothesis is that there is a correct ratio at which one would be able to purchase a home with a certain number of years worth of labor and if the market were always appropriately priced that ratio would be nearly constant over time.

Such an analysis was performed last year using home price data from The Massachusetts Association of Realtors and income data from The U.S. Census Bureau. That analysis covered the time period from 1984 - 2005. Both organizations have since updated their data sets to include values for 2006 as well.

The update contained some major surprises, which have already been discussed to some extent. The median income actually fell in nominal terms in 2006. Even more surprising, home values plummeted 15.56% in nominal terms in 2006. This decline was dramatically larger than the decline indicated by various other price gauges, and as such calls into question its usefulness. The home price data includes sales of both condominiums and single family homes, and so a large portion of the decline in average price could simply be the result of the number of single family home sales falling relative to the number of condominium sales. To the extent that condos and single family homes are substitute goods, this shift is less relevant. However, not everyone will consider them perfect substitutes or even close substitutes.

Nevertheless, for the sake of consistency, an updated graph of average home prices in Massachusetts divided by median incomes for Massachusetts covering 1984 - 2006 appears below. The blue line is the price to income ratio. The yellow line is the running average, which is the average of the ratio for all years up to that point. The red and green lines are each one running standard deviation from the running average and show the range within which the ratio could have been expected to vary in general at that point in time. The muted red lines show additional standard deviations above the average, which typically correspond to extreme values.



This is a dramatic change. In 2005, prices were roughly two standard deviations above the running average. In 2006, they were very slightly less than one standard deviation above the moving average. In other words, in 2006 they returned to what could be considered normal from a historical perspective. However, please bear in mind that the historical view given above doesn't go back very far and that the span of what could be considered "normal" now has widened quite a bit due to the unprecedented run-up in prices which began in 1999. The standard deviation is 19.91% of the average, and so the normal range, which is one standard deviation on each side, is 39.83% of the average. In other words, the ratio is back to normal now in large part because the definition of "normal" has been stretched and remains broad.

Returning to the issue of the distortions in the home price series, there are numerous other problems with using the data from The MAR to measure purchasing power in addition to the conflation of condos and single family homes. It does not account for foreclosure sales or sales by owner. In fact, there is typically a pronounced gap between data from The MAR and data from The Warren Group, probably due to those factors. Furthermore, it is susceptible to distortion from changes in the size, quality, and location of what is being sold - the same price could get you a shack one year and a McMansion the next, without changing the average or median.

A much better indicator of price changes is the S&P/Case-Shiller Index for Boston as it corrects for many flaws inherent in using the median or average. It chains together same-home sales so that the value of what is being sold gets factored into the index. There is also a futures market available for the index which lets you see where the market expects prices to be up to five years into the future and also to hedge against price declines or increases. One potential downside, depending on what you are interested in, is that it only covers single family homes and not condominiums.

Below is a graph of the S&P/Case-Shiller Index for Boston divided by income for 1987 - 2006. Unfortunately, the years 1984 - 1986 are not available for comparison to The MAR's data. The value of the index from December of the indicated year is used since that covers the sales through the end of December. The ratio has been normalized to 100 in 1999 so as to avoid any confusion with a regular price to income ratio. The year 1999 was chosen because the S&P/Case-Shiller Index is itself normalized to 100 in January 2000, which was the closest month to December 1999.



Unlike the data from The MAR, the data from the S&P/Case-Shiller Index indicates that the price to income ratio is still above the normal range. It is 1.41 standard deviations above the running average. Probably due to the smaller time window, the normal range is even larger than with The MAR's data. One standard deviation is 24.01% of the average, and the normal range is a rather large 48.01%.

Based on the ratio derived from the S&P/Case-Shiller Index for Boston, the price to income ratio at the end of 2006 was 33.81% above the moving average. This is not a prediction of an expected correction since that may occur through a combination of declining prices and rising incomes.

A common complaint against analyzing the price to income ratio is that the monthly payment to income ratio would be preferable. While that might be more relevant if you had no down payment, used a fixed rate loan, inflation was constant, and you stayed at the same property forever, none of these are likely apart from the fixed rate loan. While it would make for an interesting additional comparison, using the purchase price instead avoids the following problems:

  • Down Payment - A comparison of expense ratio is necessarily going to depend upon the down payment used to purchase the property. This will vary from individual to individual. Some people are willing to pay entirely in cash now for the right property. Their monthly mortgage expense would be $0.
  • Loan Type - Interest rates are still low, historically speaking, and there would be plenty of precedent for them to go higher. That would increase the monthly expense of those with adjustable rate loans. You could control this by using a fixed rate loan, but a lot of people don't.
  • Inflation - Low interest rates generally accompany low inflation. For a given price, housing is actually more affordable when inflation is higher because the burden of fixed payments is reduced as income rises with inflation. For more information, see the Center for Economic Policy Research article entitled The Housing Affordability Index: A Case of Economic Malpractice.
  • Holding Time - On average, US property owners own a given property seven years before selling. When you sell a property, the price is all that matters - what you paid each month for the last seven years is irrelevant. Seven years also only accounts for 23% of the time covered by a 30 year mortgage, so the sale price will be a much more dominant factor. If the majority of people are stretching to make a certain monthly payment now when interest rates are still low, as interest rates return to normal new buyers stretching to make the same payments will be able to finance less and prices will necessarily fall. In this way, you will be limited by what interest rates are seven years in the future even if you have a fixed rate loan. Even if you plan on staying in a home for a substantially longer period of time, bear in mind that unforeseen family and work developments can necessitate moving.

Double checking of the data presented here by others would be greatly appreciated in order to identify and correct any errors. The following sources were used:

The text of this post and the associated graphs are Copyright 2007 by bostonbubble.com with all rights reserved, except as stated here. You may reproduce the graphs or the text of the entire post as a whole (including the graphs) under the Creative Commons Attribution-NoDerivs 2.5 License. You may additionally scale the graphs to fit your work. Alternatively, if you remove the bostonbubble.com signature from the bottom left hand corner of the images within this post, those modified images (and only those modified images) can then be distributed under the Create Commons Attribution 2.5 License. In all cases, attribution should be made via a hyperlink to http://www.bostonbubble.com/forums/viewtopic.php?t=454 or http://www.bostonbubble.com/ Quoting excerpts of the text is also allowed provided that the quotes would normally fall under fair use. To request other terms for reproduction, please post your request in the original thread at http://www.bostonbubble.com/forums/viewtopic.php?t=454

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john p



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PostPosted: Sat Oct 06, 2007 12:25 am GMT    Post subject: Reply with quote

If you could somehow find a way to determine the average monthly payment over the monthly gross median income I think that would have a calmer looking relationship because it would temper the interest rate's impact. I guess you'd have to take the prevailing interest rate at a given price point and then make an assumption regarding the type of downpayment and loan type i.e. conforming loan for consistency..

Hey Admin, the trouble with producing excellent work is that it is thought provoking. Thanks again.
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PostPosted: Sat Oct 06, 2007 6:23 pm GMT    Post subject: Reply with quote

john p wrote:
If you could somehow find a way to determine the average monthly payment over the monthly gross median income I think that would have a calmer looking relationship because it would temper the interest rate's impact. I guess you'd have to take the prevailing interest rate at a given price point and then make an assumption regarding the type of downpayment and loan type i.e. conforming loan for consistency..

Hey Admin, the trouble with producing excellent work is that it is thought provoking. Thanks again.


Somebody did do that last year:

http://www.bostonbubble.com/forums/viewtopic.php?p=464#464

http://www.bostonbubble.com/forums/viewtopic.php?p=472#472

What I find very interesting about that approach is that while the run-up doesn't look so extreme (though it was still apparent), the last downturn looks much more extreme, dropping two standard deviations below the average.

I think that looking at the monthly payment answers a different question than looking at price to income. The monthly payment explains why prices are where they are (at least to some extent). The price to income ratio highlights when it is a good/bad time to buy.

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PostPosted: Sat Oct 06, 2007 9:25 pm GMT    Post subject: Any data for Boston? Reply with quote

I would love to see the income to housing price ratio for the city of Boston, specifically for the following neighborhoods:

-Back Bay
-North End
-South End
-Beacon Hill
-Charlestown

Any predictions on what they may look like from a historical perspective?
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PostPosted: Sun Oct 07, 2007 2:17 pm GMT    Post subject: Boston vs. Income 1984 - 2006 Reply with quote

Just a thought.

Could you add a line(s) to plot the moving average and overlay it on the graph?

Thanks.
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PostPosted: Mon Oct 08, 2007 5:29 pm GMT    Post subject: Reply with quote

What do you think of this thought:

Do you think that maybe what happened in the early 1990's might have been such that housing might have been cheaper due to the recession and the first portion of the ensuing bubble was actually a price correction. Just like we measure everything from the peak in 2005 (which we all know was too high), is it possible that the early 1990's were too low and again, part of the bubble was bringing the low point up to the normal?

Part of why I see it hard for the market to collapse is the catch-22. First, if the equities markets tank, investors tend to find sanctuary in real estate. Then, if the stocks shoot up, people have more money to pay for more house.

I think the question is how long can the market stay really high when the fundamentals don't align with affordability for first time buyers? The college tuitions that some of these kids are paying and the loans that they have outstanding are enormous so I just see either major salary adjustments in professional fields or we'll have a generation of renters.

When you do those salary calculators to determine/compare how much a typical job will pay in different cities, I think Boston is pretty competitive when you consider what you get for an employment base. I think that the office developers, who are very politically juiced in, do a lousy job of providing nice space at a reasonable price. Office rents and leases are also pretty expensive so the cost of doing business is higher.

I think that New York have awful taxes. They are insane there. If we can cut the fat out of government spending we will be fine. Building infrastructure is a good thing because at least we get something for it and by staying on top of maintenance we can save money in the long run.

I think this Iraq War cost way too much and each State will get less Federal Money, if one State has a better approach to dealing with their finances, they will have a medium to long term advantage. I am not a Mitt fan at all, but Deval scares me because he listens to the wrong folks, those that want an easy fix, the lazy, dumb, dishonest and corrupt ones.

Just like our country has wasted about 6 years of opportunity to move the line of scrimmage forward for our society by being in Iraq, Deval will waste everyone's time and money by debating casinos. It is exhausting to debate a ridiculous point, and we need to elevate the dialogue on more important matters.
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PostPosted: Wed Oct 10, 2007 3:01 am GMT    Post subject: Reply with quote

Thank you everybody for your posts. I'm going to respond to them all at once to hopefully keep things organized.

Tank wrote:
I would love to see the income to housing price ratio for the city of Boston, specifically for the following neighborhoods:

-Back Bay
-North End
-South End
-Beacon Hill
-Charlestown

Any predictions on what they may look like from a historical perspective?


I would love to see that too. I'm not sure where to get the data, though. The Warren Group breaks down prices by neighborhood (or at least city), so maybe that's a start. I seem to recall that the data doesn't go back very far, though. It also isn't on a publicly accessible web page and you have to register for an account to get to it, so I would have to re-read the registration agreement to see whether this would be prohibited use of their data.

I haven't found any neighborhood-specific income stats, though. So the question of whether the Warren Group numbers could be used or not is moot until there is at least something to use them with.

If somebody can recommend references, it would be appreciated.

Pen wrote:
Just a thought.

Could you add a line(s) to plot the moving average and overlay it on the graph?

Thanks.


What do you think the benefits would be to using a moving average? I'm curious what you had in mind since I'm not sure what time window would be appropriate, and the intended interpretation may make that obvious. The benefit of the running average is that it is meant to correspond to the hypothesis that there is a "constant" ratio that corresponds to the fundamental value, and the more time included, the better the approximation of this "constant." If you had a moving average, what would you be looking to measure?

Quote:
Do you think that maybe what happened in the early 1990's might have been such that housing might have been cheaper due to the recession and the first portion of the ensuing bubble was actually a price correction. Just like we measure everything from the peak in 2005 (which we all know was too high), is it possible that the early 1990's were too low and again, part of the bubble was bringing the low point up to the normal?


My hunch is that it may have been a small factor, but not a significant one relative to the magnitude of the subsequent run-up. Unfortunately, the data doesn't go back nearly far enough. We really need a data set with many more real estate cycles included to draw any conclusions. My hunch that it was a minor factor at best is based on Professor Shiller's work on national prices which does go back much further and which shows that the correction in the early 1990's wasn't an anomalous over-correction (at least not from eyeballing the chart):

http://en.wikipedia.org/wiki/Image:Shiller_IE2_Fig_2-1.png

Recessions are normal occurrences, and the one in the 1990's looks like it just brought national prices back down to the long term trend line. I don't know how well that correlates to Boston, though.

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PostPosted: Wed Oct 10, 2007 4:37 am GMT    Post subject: Reply with quote

Judging from that graph, I would say 25-30 percent were an additive price correction after the early 90's recession and after that the 70-75 percent price run up as you describe. Now discount for the interest rate impact because we know that a lower interest rate means more affordability, and then discount for 2006's and 9/12 of 2007's decline and we have the balance of the correction ahead. If it was just this trend, I'd see us back in business in mid 2008. But just like how 1990's dropped below fundamentals, this correction might not just floor at fundamentals but could drop lower.

The new problems coming down the pipeline I think could make that happen:

First the huge amount of adjustable resets

Second, the inability of new buyers to reach the entry level housing due to them being bonded with student loans and lower salaries.

Third, we get a recession and get some serious job losses.

Fourth, all the bonds floated by local and state governments start to pile up and local taxes go up to pay for the cost of doing business.

Fifth, we get a surcharge for the Iraq War. This is reasonable to be proposed and as we try to deny this possibility we're really keeping the Iraq issue fiction in our minds like just a subject on t.v. and not real.

Sixth, we get socialistic politicians who add too many entitlements or create changes that shock the the fragile financial positions of many struggling Americans.

Seventh, we get a bigger trend of people moving out of Massachusetts: retirees and company relocations...

Eighth, we get either a polarization of rich towns and poor towns within Massachusetts or a first phase of polarization in pricing and then a rebalance and an investment in "value stock" towns...

Ninth, we get the tab for a couple of decades of not keeping up with infrastructure maintenance and repair and the cost overruns of the Big Dig.

Tenth, Boston endures a local stagflation while other areas prosper in relation. Affordability reduces due to transportation costs, heating costs, medical costs etc.

Eleven, any combination of above.

What is going for the market is that the city is starting to really look nice compared to it's low points and it may draw from areas outside Massachusetts, other large cities are also in the same boat, and we continue to acquire worldwide ownership wealth (stock holdings) in this area and the money get's passed around (trickles down). If things don't trickle down now, they never will.
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PostPosted: Thu Oct 18, 2007 6:40 pm GMT    Post subject: Reply with quote

Quote:

Judging from that graph, I would say 25-30 percent were an additive price correction after the early 90's recession and after that the 70-75 percent price run up as you describe


I don't think the additive correction was so high. Professor Shiller has a spreadsheet with the data used to build that graph on the website for Irrational Exuberance. Here's a plot of the inflation adjusted housing price index for 1890 - 2007 with an exponential regression curve added:



Only 14% of the enormous run-up at the end is below the regression curve, and therefore an additive correction. (Note: I got that by measuring pixels since OpenOffice.org magically added the curve without providing an obvious way to get at the underlying coefficients, so it may be slightly off from 14%.)

I would also argue that the recent run-up was so extreme that it will skew upward any regression curve or average. If we throw out the data from 2000 on and graph 1890 - 1999, we get:



In this case, the additive correction component is negligible and the early 90's downturn was actually almost entirely a return to normal.

You make some excellent points about possible vulnerabilities to the housing market here. I think I would add #12: China, et al, decide to stop funding US debt, thereby removing an artificial damper on interest rates, causing rates to rise significantly. Rates could have plenty of room left for an additive correction of their own, given that they are still historically low.

I also think the collateral damage from the mortgage industry implosion could set off a chain of dominos, leading to a recession. I know a recession was on your list, I'm just pointing out that it may actually be directly related to housing. I read an unconfirmed rumor that Google was getting 30% of their revenue from mortgage ads, and that this has now vanished leading to a hiring freeze (which is a dramatic reversal). Unfortunately, the blog with the supposed inside source has vanished since I read it, so this may be bogus, but it does pass the plausibility test as I have noticed a lot less dancing aliens/ladies/shadows elsewhere. It is unfortunate to consider that one of the engines driving the US economy for the last few years (tech) might be significantly vulnerable to weakness in the housing sector.

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PostPosted: Thu Oct 18, 2007 9:09 pm GMT    Post subject: Reply with quote

admin wrote:
I read an unconfirmed rumor that Google was getting 30% of their revenue from mortgage ads, and that this has now vanished leading to a hiring freeze (which is a dramatic reversal).


OK, I guess that rumor was wrong (or at least not of immediate significance):

Google's profit rises 46% amid strong sales

While analysts have cheered Google's hold on the search market, they have been more cautious about its rapid hiring and heavy expenditures. The company said in a prepared statement that it added 2,130 new employees since the end of its second quarter in June, and noted that, "We expect to continue to make significant capital expenditures."

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john p



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PostPosted: Thu Oct 18, 2007 10:47 pm GMT    Post subject: Reply with quote

Regarding the corrective additive:

I wonder if Shiller needs to get up on a step ladder when he presents this....

Anyway, this graph is an inflation adjusted housing index... I know that the interest rate absorbs some of the inflation, but I wonder if the fact that interest rates dropped from like 8.5 percent to 4.5 percent in about 4 or 5 years that the monthly payment dissipates the affordability spike to some degree. The percentage of income to service the mortgage payment has gone up, but isn't as dramatic as what this chart says, or am I looking at it wrong?

I wonder what the slope of the purple line is and what the slope of the historical inflation line is?

Your right about China, that list could go on and on.

What are your thoughts about what market correction could happen overall? I mean it seems that China has a bubble and almost everywhere has a real estate bubble. Greenspan used to talk about how the Market used to figure out a way to correct itself. What gives now?
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PostPosted: Fri Oct 19, 2007 6:47 pm GMT    Post subject: Reply with quote

Quote:

I wonder if Shiller needs to get up on a step ladder when he presents this....


Maybe he could borrow the lift Al Gore used for his movie.

Quote:

Anyway, this graph is an inflation adjusted housing index... I know that the interest rate absorbs some of the inflation, but I wonder if the fact that interest rates dropped from like 8.5 percent to 4.5 percent in about 4 or 5 years that the monthly payment dissipates the affordability spike to some degree. The percentage of income to service the mortgage payment has gone up, but isn't as dramatic as what this chart says, or am I looking at it wrong?


Low interest rates probably did have a good deal to do with the formation of the bubble. However, there are may reasons to expect that low rates were and are temporary, and by corollary that the higher prices they supported are temporary.

Quote:

I wonder what the slope of the purple line is and what the slope of the historical inflation line is?


Those shouldn't be lines, unless you use a logarithmic scale. The regression is actually an exponential curve (unless I did something wrong), just with a very low rate of growth. If I remember correctly, I think that Shiller said in his book that the annualized rate of real appreciation was something like 0.8%, with most of that being the result of the huge spike at the end.

Quote:

Your right about China, that list could go on and on.


I thought of another one: #13) baby boomers retiring en masse, bankrupting Social Security, bankrupting Medicare, vacating a huge chunk of GDP, etc.

Quote:

What are your thoughts about what market correction could happen overall? I mean it seems that China has a bubble and almost everywhere has a real estate bubble. Greenspan used to talk about how the Market used to figure out a way to correct itself. What gives now?


I really have no clear idea. There are so many points of vulnerability, and the catalyst could be any of them. It could even be something totally obscure which starts a chain reaction. Shiller describes some studies he performed during past crashes, and the scary thing is that the crashes had psychological triggers and did not appear to be based on anything fundamental.

The path to a correction that might annoy me most would be a devaluation of the dollar coupled with high domestic inflation. Some would say that this is already happening. However, if this were indeed the case, it should be showing up in rents and incomes, which it is not (at least not on a broad enough basis).

Another question which is hopefully easier to answer, and which has an even more practical application is what won't give now? Is there a safe way to save/invest? I don't know that either. It may be a choice between the lesser of N evils, which may even turn out to be housing before the price to income ratio returns to normal.

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PostPosted: Fri Oct 19, 2007 9:42 pm GMT    Post subject: Reply with quote

I think the adjustment will be in currency valuation. I think that the ownership rich are going to be pissed because their money might be worth less.

If you take the trend line of the growth of stocks versus general inflation you can see how stocks really, really outpace inflation. If this is the case, the rich just keep outpacing the growth of regular folks. I think this disparity is one large fundamental for our current situation. Different political parties have different outlooks on the use of taxation. Democrats tend to see taxes as a redistribution of wealth. Republicans see this as socialism. The truth is that we wouldn't have a middle class without some socialistic programs like Social Security etc. We wouldn't be an economic superpower if we had the socialistic standards of some of Europe, so it's a balance. I think that a Republican Administration after a stock market bubble would certainly concentrate a lot of money to the ultra rich. I just hope that the political solution doesn't set us back too much.

As far as some folks not seeing reality. I just got back from NYC and it's like that place is hopping. I think you're always going to find a segment of the population that is willing to roll the dice and view their life as a gamble to put all their chips down. Manhattan is that type of place. Look at the kids signing up to be on the Trump Intern show. There is always a line for NYC. The trouble is that although that demand is constant, they can't see the deflation in other areas, so the finance folks there have a rosey outlook in my view. (my view... oh, well if you say so....).

Anyway, my point is that people that are living in a bubble think like a bubble and behave like a bubble. The rich right now are living in a bubble. In Wellesley they are arguing about McMansions like they are the worst thing ever. It's like they fail to recognize that poorer towns are going to get stuck with casinos and some folks are fighting a war. Can you imagine during WWII if a town was complaining about McMansions while others were fighting the Nazi's? The rich are in a total bubble.
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PostPosted: Fri Oct 19, 2007 10:18 pm GMT    Post subject: Reply with quote

john p wrote:

If you take the trend line of the growth of stocks versus general inflation you can see how stocks really, really outpace inflation. If this is the case, the rich just keep outpacing the growth of regular folks.


Actually, that is a very recent phenomenon as well. Check out this inflation adjusted graph of the Dow from 1924 through the present:

http://www.itulip.com/realdow.htm

Judging from that graph, stocks haven't been all that great of an investment in real terms for much of the covered history (one caveat - I am guessing this doesn't include dividends). Buying in the mid 60's would have led to losses for decades to come. It wasn't until the mid 90's that the Dow started to seriously outpace inflation, so I wouldn't expect that to be a permanent characteristic of stocks. I think the interest rate distortions are at play here too, and in more ways than with housing.

I think you are totally right about people rolling the dice and living in their own psychological bubble. This can (usually?) lead to disaster, but people don't see that because there is a survivorship bias in stuff like Trump's show. There's a good book on this called Fooled By Randomness written by an ex-trader who details how success (at least in the financial sector) is largely a function of luck, and most in the industry don't recognize it. Your story about NYC made me think of this.

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PostPosted: Fri Nov 02, 2007 3:23 pm GMT    Post subject: Reply with quote

What happened in the mid 90's to give this sort of spike?

Overall context economically: low employment, fear of inflation, tons of production...

http://gatton.uky.edu/cber/Downloads/usecon96.htm

Look at population, think about the age brackets of sellers - typically older, and buyers, typically younger. You can see how the brackets of buyers really outnumbered sellers so the sellers had the better ratio to give them more power to raise prices.

http://www.prb.org/images3/WhitePopPyramid.gif

Massachusetts was having less children than other states.

http://www.cdc.gov/mmwr/preview/mmwrhtml/figures/m449qsf.gif

US to Europe birthrate:

http://www.nald.ca/fulltext/learnliv/images/fig91.gif

echo boom peaked in 1990

http://en.wikipedia.org/wiki/Echo_boom_generation

echo boom's impact on housing for colleges (Boston is a big college town and the surcharge for housing demand pushed up property values)

http://asumag.com/DesignPlanning/university_echo_boom_impact/

Take also into fact that we had an explosion of value into city rental/condo property due to the elimination of Rent Control in the 90's.

So take into account, an echo boom and the huge demand for college housing in the mid 90's with rent control coming to an end at the same time. Perfect storm. Further, you have a post early 90's recession baby bubble in Massachusetts because people waited until after the recession to have children.

So here is my point for the day:

I blame the women. just kidding... seriously though, with less children, you have more women in the workplace. The more women in the workplace the more productive an area is. The more productive an area is, the greater the demand for that area to live in is. The longer women stay in the workplace before many drop out to become Mom's, the more senior they become at their jobs, and the more pay they get. The more dual incomes couples, the higher the fundamentals go with respect to affordability. The higher the education level for both men and women in an area, the higher the income strata goes. Further, when you compare two high level salary earners in a household income, it is very hard for a single earner household to survive let alone compete for decent housing.
The way I see it is that you really need two incomes to buy a decent starter home.

The way I see it is when we have economic slow times, you see more women enter the workplace. Think about after the 80's slump, remember that song "She works hard for the money, so you beeeeter treat her right... alright?" Think about the Dolly Parton movie 9 to 5 in the 80's. So when you get economic good times, you see the birth rate go up. When the birth rate goes up, and you get more stay at home mom's you get lower unemployment because as a women leaves work, you need a warm body to fill that seat. I think the self fufilling nature of this is that if times get slow, mom's go back to work, and salaries go down because you have more people competing for fewer jobs. When times get good, mom's leave work to raise the kids and now you need more bodies to fill the empty chairs at work.

I think the fundamentals for our Boston economy has adjusted to two earners. I think what is confusing is that we don't have an economic profile cross section of buyers and we are mixing household incomes for prior generations where mom stays home. If you could see a clearer picture of the younger buyers generation, you'd see that the salaries are higher because a higher percentage of the younger generation have dual income families....
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