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That article reminds me of the ancient wisecrack about a fellow with one hand in a freezer, and the other hand on a hot stove burner, while a statistician proclaims that on the average, he’s comfortable.Any national average of “volatility” doesn’t tell you much about what’s going on in markets where local politics (zoning, building codes et al) has prevented entrepreneurs from building needed houses for decades. It also doesn’t tell much about the effects of huge investment funds (with access to dirt cheap Federal Reserve money) that are obsessed with buying up SF houses to turn them into rentals, while securitizing that rent revenue, nor in what areas such funds are focusing their efforts. It’s not politically correct for Case-Shiller to address the difference between the fedgov’s hopelessly bogus BLS inflation numbers while Chapwoodindex.com provides a far more realistic tracking of the skyrocketing prices of real things and services that real people actually pay, in major city by major city across the country.
Finally, Case-Shiller is not discussing how housing bubbles are driven like clockwork by Federal Reserve money-pumping cycles.
Two groups most vulnerable to such shoddy forecasting are house owner/investors betting on appreciation, and seller-finance people collecting a payment stream with zero idea of how much purchasing power they are losing by charging insufficient interest to cover not only taxes and their profit, but also the loss of purchasing power (from actual inflation, not the bogus “official” numbers) in those payments. It’s why for the former group, low risk deals involving options or master leasing are a lot safer. In the latter case, it’s worth keeping in mind that when FDR effectively devalued the US dollar during his 1933 gold confiscation, private lending suddenly dried up — because nobody knew what the dollar’s value would be in the near future.
–Dee
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