>>>I can't agree with the authors assumption that if supply and demand where in balance, then home prices would appreciate 6-9% per year.<<<
I am just curious where you read that because I can't seem to find it...
Inventories are increasing, I do not disagree with that (something like 12mos backlog), but does the price drop in housing correlate to these inventory levels? Maybe it does, but we are still early in the unwinding of the Housing Bubble and I just don't see the major price depreciation everyone is talking about. We'll get there, but keep in mind that the areas I am speaking of have increased in value by 300% or more in some cases.
>>>If wages are going up at 3% then, it only takes a couple of years and supply would greatly exceed demand.<<<
Wages have risen 3% in 4-years and have just approached 1998 thru 2001 levels. By compaison, the price of a gallon of gas back then was a little over a buck to a buck and a half. Compare today's hourly wages to that of a gallon of gas and it is plain as the horns on my head that inflation is the ultimate culprit of hourly wage pressure.
In a word ... Inflation. Wages cannot and have not kept up with inflation in quite some time and I do not believe they will without a severe correction. No correction, more inflation, it's as simple as that. More inflation and home prices will remain somewhat buoyant until inventories overwhelm the market.
I do not think we are that far apart on what we are discussing here, I just tend to believe that home prices have MUCH further to fall. That and that wages have not kept up with inflation.
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