Housing Bubble...

I've been looking for this data for months, and finally found a good source: the Bubble Meter blog, whose author also created and publishes this graph on his web site.

The red line (inflation-adjusted home prices) is the one to pay attention to. That line clearly shows the onset of the housing bubble around 2001. This happens to be exactly when the financial industry (urged by Congress) figured out how to package dog turds (the high-risk home loans to unqualified buyers) as gold-plated AA-rated securities. These securities were then purchased by normally-sane investors, who were for some reason willing to believe the computer models rather than their own sense of smell.

Kinda like the anthropomorphic global warming folks. Hmmm...

Anyway, there are a couple of things I take away from this chart. First one: here in San Diego County, we wish those were the averag home prices! Ours are roughly double what this chart shows. Second, the long-term inflation-adjusted home price seems to waver right around $150,000 with a slight increasing trend. If you imagine the housing bubble never happened, and you extrapolate that trend, then home prices right now “should” be around $175,000, plus or minus $25,000 or so. This suggests there's still some more price decline to go.

Oh, and one more thing: if you bought your home more than about 10 years ago, your home's value still has gained more than the historical average. Even if you purchased as recently as 5 years ago, most likely you're still breaking even. The sky hasn't fallen just yet...