bubbleHere’s an interesting read about the prospects of a new real estate/housing bubble, an idea that’s making the media rounds but doesn’t withstand closer scrutiny:

First, prices, as measured by Case-Shiller, are still down 27 percent from their peak seven years ago. But Case-Shiller calculates nominal prices, not real ones. And the consumer price index (inflation) is up 15 percent since 2006. So real house prices are about 37 percent below 2006 levels and are just now returning to where they were 13 years ago. […]

And here’s a tip for the math-challenged out there: It takes a larger percentage increase to offset takes to offset a percentage decline. Take a $100,000 house at the peak. If it fell the real national average 42 percent in the bust, it would have been worth $58,000 at the bottom early last year. But to get back to $100,000, it would take a 72 percent increase from the trough.

Even now, after the sharp bump off the bottom, prices would have to jump 60 percent to get back to their bubble-era peak.

As I’ve mentioned, everyone has to hustle in today’s super-competitive market. But part of any successful real estate strategy is to keep history — and reality — in perspective.

What’s your take on where we’re at and where this is all headed?

[Via CJR]

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