Sunday, March 2, 2008

How different is it here?

Last night over dinner my friend Dave and I made a $1 bet on the following: I said if you look at big US cities over the time period of 1990 to 2010, the % change in housing prices will be about the same. This is because over the long run housing is in equilibrium, nationwide.

He said I was on crack.

Speaking of crack I said, my theory holds true, except for Detroit which is so fucked up a city, it can't be compared to anything in reality world.

Well here is what I found courtesy of for Jan 1990 data. The Jan 2008 data is linked to various sources.

$176,000 to $400, 000...227% higher in 2008 than 1990

$176,000 to $325,000....184% higher in 2008 than 1990

$117,000 in 1990 to to $262,000 ...223% higher in 2008 than 1990

Los Angeles:
$226,000 to $469,000....208% higher in 2008 than 1990

Las Vegas:
$103,000 in 1990 to $249,990 in Jan 2008....241% higher than 1990

$83,300 to $230,000...277% higher than 1990

$113,000 to $314,200....277% higher than 1990

San Diego:
$223,000 to $465,000....209% higher in 2008 than 1990

$293,000 to $744,500...254% higher in 2008 than 1990

I couldn't find anything on Atlanta, here is something about Alpharetta from a Realtor:

"The median house value in Alpharetta in 1990 was $119,800, approximately 30% higher than the Atlanta Region’s median of $ 92,300, with 62.3 % of Alpharetta’s housing valued at $ 100,000 or more. Since then the median house value in Alpharetta has soared by more than 145%; reaching $295,514 by January 2007."

take a conservative 5% off since Jan 2007 to Jan 2008 and the $295K is $280K and you end up with 233% gain from 1990 to 2008. In line with other cities in the country.

So, over the past 18 years American cities have in general seen house prices a little more than double. Las Vegas, Phoenix and Miami went a little more nuts. The bet was 1990 to 2010, so we have 2 years to go. The way housing is in free fall in Phoenix, Las Vegas and Miami, by 2010, the numbers will be right around the 200% mark, in line with the rest of the cities.

And lest anyone think 200 to 250% increase in prices is anything to get excited about....

- S&P 500 is 380% higher than in January 1990.

- even after the .com implosion, NASDAQ is 500% higher today than in Jan 1990

- gold is 250% higher than in Jan 1990.

- silver is 375% higher than in Jan 1990

- oil is 350% higher than in Jan 1990.

For all the hype and propaganda out there about real estate, it's a pretty piss poor investment over the long run. Add in the costs of maintenance/repairs, property taxes, buying and selling costs and it is an awful investment. And yes it costs money to buy and sell everything, but I don't pay 6% in commissions to buy stock or gold. I pay $10 a trade for buying $20,000 of investment. Nor do I pay 1-2% a year in property taxes for my holdings of gold, silver or equities. And the roof or furnace of my equities don't need fixing either.


David said...

I thought it was for 100 years, the difference would be 1%. But this is still pretty wildly varying - for the period you speak of, there are about 100% differences between the high and low cities.

Ed said...

I looked around for older stats going back 100 years but I couldn't find much.

You're right there is variance, but we have 2 years to go. The cities with the highst number are falling the fastest.

I'll update thiss every few months and I predict the numbers will get closer and closer.

Anonymous said...

Here's something interesting. A book was written in 1931 about the Florida housing crash called "Only Yesterday." It's eerily familiar to what's happening today. I remember reading (somewhere) that there were houses in South Florida that are selling today for the same prices that they were selling for in the 20's. That gives an idea of how ridiculous inflation was in that time period. Kinda long cliff notes version but well worth the read.