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Yet in year 2000 dollars, as of today, the median home price, after a dramatic fall over the past two years, is still substantially higher than it was during the year 2000:
And what is that suppose to reflect or more importantly what are we suppose to derive from that statistic?
The fact that the price of commodity A has suffered a dramatic decline but is still higher than at some previous point tells us very little and almost nothing regarding the health of the market for the commodity particularly when the price has little elasticity due to the price being pegged to value of the loan which was used to make the initial purchase.
The source, including the URL, is included on the graph. The rate as of the last download was 4.2%. The average rate during the Clinton years was 5.46%. You can derive this yourself from the link you posted. The average rate during the Bush years has been 4.99%.
And what is that suppose to reflect or more importantly what are we suppose to derive from that statistic?
The fact that the price of commodity A has suffered a dramatic decline but is still higher than at some previous point tells us very little and almost nothing regarding the health of the market for the commodity particularly when the price has little elasticity due to the price being pegged to value of the loan which was used to make the initial purchase.
Negative, sir. If home prices were pegged to the original loan value, we would not be in the situation we are in now. In fact, the opposite is true. Home prices are pegged to the ability of the buyer TODAY to secure financing today, at today's current rates.
With an increase in rates, as well as a decrease in available "credit", home prices have fallen. This phenomenom places the current homes in direct competition with the homes purchased under the low rates and easy credit of the boom cycle. Homeowners are walking away from their homes because their homes are worth less than they can purchase across the street.
Despite the disparity, and the obvious bubble and drop, homes have proven to be an attractive long-term investment, when measured over time.
If you would like, I can post the associated data and elasticity calculations for homes over the past 40 years.
The fact that the price of commodity A has suffered a dramatic decline but is still higher than at some previous point tells us very little and almost nothing regarding the health of the market for the commodity particularly when the price has little elasticity due to the price being pegged to value of the loan which was used to make the initial purchase.
Just to clarify, housing has a long-term demand elasticity of 1.2, or essentially unitary elastic to elastic, as it is greater than 1.0. Your statement is inaccurate.
To clarify further, and to answer your question, the statistic tells us that the market has adjusted normally, but is still healthy overall. That is central premise of my original post.
Source: Economics: Private and Public Choice, James D. Gwartney and Richard L. Stroup, eighth edition 1997,
home prices need to continue to fall. Historically, home prices have been tied to incomes..they won't stop falling until they reach levels people can actually afford.
Quote:
Originally Posted by NewMexicanRepublican
Yet in year 2000 dollars, as of today, the median home price, even AFTER a dramatic fall over the past two years, is still substantially higher than it was during the year 2000:
I just pulled the data from the Census Bureau here:
home prices need to continue to fall. Historically, home prices have been tied to incomes..they won't stop falling until they reach levels people can actually afford.
gas costs less than it did 25 years ago adjusted for inflation
Using the gas adjusted price chart provided in an earlier post, the highest price ever reached for gas was in 1981 when Reagan first took office, which was a little over 25 years ago.
So you are saying that all looks fine with today's gas price when you compare it to the absolute highest point ever reached (adjusted for inflation)?
Actually the chart is from April 2008, and doesn't reflect the prices reached during Summer 2008 when we were paying over $4.50 a gallon in some areas, such as California. So we actually surpassed the 1981 peak this year.
And the chart also shows how the price of gas rose DRAMATICALLY between 2001 and 2008 when Bush was president!
It went from $1.60 in 2001 when Bush first took office up to over $4.50 in July 2008.
Only in the past few months the price dropped back to around $3.00, partly due to the recent Economic Crisis.
During the Clinton Years between 1993 - 2000, the price of gas ranged between $1.25 - $1.75.
And you want to know what the "Demmies" are angry about????
Stated another way, if you had bought the median home in 2000, it would be worth 50% more today than it was in 2000, in inflation adjusted dollars, even after the meltdown of the past two years.
I'm not certain I follow. If I sold a client a home in the year 2000 it is worth 50% more than they paid for it if they sell it today?
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