Masters in Comp Sci and you can't figure out how to bold something?(quoting your post shows 2 bold tags.) Your intellect shines through by the way you are able to so succinctly articulate your point. Bravo. A fellow CS man eh? I had a good number of those classes too - except I went up through Calc 4(diff eq) and had all those "masters" classes(discrete, numes, theory of comp, quantum computing, etc.) in my undergrad curriculum. First off, the Forex market is a whore: it does whatever the individual/group who has the most leverage wants. The mere thought you propose that the USD is in any way accurate as a measure of anything is juvenile. You mention that the dollar falls due to our "economic debt obligations." The dollar also falls because Ben B. can't keep his mouth shut and 1000 other reasons, so what's your point? I could care less about that chart - I don't need/want to present anything related to it and could care less how it is presented. Unlike you Mr. Perot I don't need to use random charts to facilitate my point. The chart was used to demonstrate a point, but the chart is flawed in relation to that point. Even in your reply you continued to demonstrate foolishness. You basically said that, oh, where was it... Yes, they vary in relation to interest rates, but like most of your points you're doing things half-assed. There are MANY other things that affect the prices of home besides interest rates and the value of the currency. I'm not going to go into it as I'm sure you've had a few econ classes, though apparently didn't absorb much. And on that chart the index is a 1:1 relationship to dollars. They explain why they are "adjusting" things based on inflation, and that's the reason I made the comment I did. They want to demonstrate how crazy home prices are now compared to then using inflation as a proxy, which doesn't work! Here's an easy example: if my neighborhood is overrun with drug-dealers and street gangs in the next 5 years the USD value of my home will plummet, but according to that chart it keeps going up. Now how about if that devaluation of property happens in various ways to the entire region where I live: jobs leave, homes are foreclosed, values decline. The USD didn't lose value but my house did. Now yes, that's one region, but how about if energy prices go up and that causes homes to, however indirectly, become foreclosed. Same reason and same outcome. But WTF? You said because , oh, where was it... The change in price of a house reflects the change in price of the USD? Are you still serious? Here's a smaller example: I can buy a 42" flat-screen from Best Buy right now for $799 right down the street. If I drive 6 hours away it costs $999 at a Best Buy store. I still cannot believe you can drink this chart kool-aid and think it tells an accurate story, other then the one its author desired. Regards,
I won't address the childish provoking behavior between you and trader. Embarrassing you call yourself educated and probably a professional. Furthermore, what do interest rates, inflation, and the valuation of a currencies have to do with advanced calculus (you state you took calc 4 later on)? Furthermore, addressing the real issue here. The valuation of homes overtime obviously changes. The argument entails what methodology do we value these homes at? Price? Utility? Desirability? Location? Jobs, interest rates, relative purchasing power? All these issues pertain to the price of houses. The seemingly most accurate to gauge the relative value of a home, would be to deflate the price of a same sized house, in the same locale, using the same scale. The argument that interest rates are not included into this chart is interesting due to the simple notion that low interest rates spark aggregate demand. high aggregate demand, higher consumption and ultimately higher house prices due to growing demand and higher incomes and possible inflation. (IS-LM curve to the right) The opposite happens as well, high interest rates provoke low consumption and borrowing methods. hence the flat prices of 70's and 80's while both periods experienced above normal inflation readings. (IS-LM curve to the left) Both Situations can obviously occur, low interest rates combined with low aggregate demand. Which can occur in deep recessions, and depressions. Your gangbanger argument is interesting, however you're simply stating demand for housing dropped. Therefore prices of those pre-existing homes fell as well due to worsening conditions. This can all be stated in that price, considering when new conditions arise in established communities, they will be reflected by the economic stature of the nation (interest rates, inflation, unemployment, GDP growth, etc)