Follow Up - Housing Bubble

In response to all the feedbacks received in the previous post, I am adding some more graphs on this topic. First of all, since this Case Shiller index is only maintained for a handful of cities we are definitely missing out on "Lone Rock"s of US. As the name suggests they are the lone rocks... I go to Milwaukee for work and can tell you that it is nice to have four seasons and if you have a decent job and dont mind shovelling snow from your driveway or car lone rocks of US are the places to be in 3 Bedroom/ 3 bathroom houses available for $150K. Call it a piece of dream or peace of mind.

In response to Joe and my friend Bill's suggestion I have done some moving average analysis on the data that I had. To keep it simple, I have compared only Charlotte(where I would like to move) and San Francisco(where I currently live). The graphs have 4 months, 12 months, 24 months & 48 months moving averages. The flattening of the San Francisco 48 month graph towards the end is again an interesting fact however, the Charlotte graphs do not show any downward trend whatsover.





Now, coming to the income aspect(based on the data in http://www.census.gov/hhes/www/income/histinc/h06ar.html ) ,even though it is true that home prices do increase 3-4% yoy to keep up with the inflation the same is not true here. Looking at the median income by region till the year 2006(thats all the data I had in my possesion, I will look for more refined data soon, I know for housing I am comparing city specific data but for income I am comparing region specific data), you see that the absolute values have increased for all the regions.



Interesting thing here is to note the widening income gap between the regions where North-East & West lead the pack. However, by looking at the parallel nature of the lines in the last part of the graph(or the slope of the lines depicting the rate of increase of income), it does not seem that there is any discrepancy between regions in terms of rate of increase of income from 2003 onwards. In the same time frame however, the housing bubble has been busted in most of the cities and it still does not show me any indication that Charlotte, NC will have any major decline in home prices in the coming years and it is completely out of whack with income. But, I am not sure if there is a declining trend in NC economy(I need to do some analysis on that front) which will definitely have an impact on the house prices...