Sunday, December 16, 2007
House prices, bubbles and inflation
"I looked at the Nationwide house price index for the UK. After adjusting for inflation, the result is a line with two interesting characteristics. The first is that there is a surprisingly stable linear trend, with only a moderate upward shift. Real prices go up over time but not by much, and any deviations from the line are followed by a return to trend. The second is that past bubbles were relatively symmetric - both in extent and in time." Unless there has been some structural shift, there is going to be one of the most serious housing downturns ever"