ShillerRobert Shiller updated his long series on real house prices (1890-Q3 2008). For today's exercise, using this data, I made the attached graph which currently shows reversal of about half the gain from 1997-2006.

Believers in over-reactions to the downside and history repeating might worry based on what happened in the past. There was a smaller bubble which peaked in 1894 at 124, and declined irregularly until bottoming at 66 in 1921 (47% decline over 27 years).

Surviving optimists might take heart from the 60% increase that occurred 1942-1947, which pulled back again but remained stable for decades.

David Riffer writes:

The thing that jumps out at me from this long term Shiller graph is that real house prices were roughly the same in 1988 as they were 100 years earlier. This cuts very deeply against the grain of conventional wisdom, but it is consistent with the seminal study by Piet M. A. Eichholtz that examined prices between 1628 and 1973 on the Herengracht in Amsterdam.


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