You may have seen this post we did a while ago (May 27, 2008) as a result of a certain challenge. We might very well be inserting foot in mouth soon, but not yet. Regardless, we thought you’d like to see a post from the past and how it’s getting all too true to life.
The original post in its entirety starts now:
Accepting our recent challenge to “show us a legitimate graph of home values for San Francisco, or the Bay Area, or California, or the Nation, hell you might as well make it the world for that matter, that looks like [the declining chart on this post]”, Paul G steps up to the plate with this chart and explanation below:
You did open the chart challenge up to the world so I thought I’d submit this one. I can’t upload images to your web-site so I’m emailing it to you. Feel free to post, if you want.
The green line represents the cost of residential land in six major urban centers in Japan since 1955. The blue line represents San Francisco prices using the Case-Shiller index, but, in order to make the peaks coincide, I’ve moved all SF values back 15 years.
No, I don’t think San Francisco prices are going to follow the same trajectory down for many reasons (inflation, the 30-year run-up in Tokyo compared with the 10-year run-up here) but it’s still an interesting graph.
Regards,
Paul
Thanks for the graph! Very interesting to say the least.
[Paul, if you’re still reading theFrontSteps, would you care to update your graph and send it in?]
–Chart Fun: Declining Real Estate Values [theFrontSteps]
–San Francisco Mimics Japanese Land Value Decline (Sort Of) [theFrontSteps]
–San Francisco or New York City, if you had to choose [theFrontSteps, Battle Royale]
nice post.
First of all, Case-Shiller represents the San Francisco MSA, not San Francisco. The MSA consists of San Francisco, San Mateo, Marin, Contra Costa and Alameda.
Second, people should be highly skeptical of any chart created from two different indices then graphically transposed onto the same graph. Indices like these are “calibrated” based on the data (i.e. normalize the data to start arbitrarily at 100 and then plot the deviance over time.) You can just combine two of them on a piece of paper and hope to glean anything useful.
So, yes, cute chart, but it’s meaningless.
My attempt at an update, albeit without the time shift. I’ll work on that part too, and perhaps report back when I have it. Case Shiller data up to December 2008 as of this writing:
http://www.chartmechanic.com/chart.jsp?c=demo/Japanese%20Real%20Estate%20Bubble.chart
Dave can argue that it is meaningless to look at the two charts, but what I see from Charter’s new graph is that the SF MSA is seeing a steeper, quicker decline than Japan saw in its epic implosion, and the decline is still accelerating here.
Yes, I’m still reading the blog but Charter beat me to it on the graph.
I don’t see anything misleading in drawing the two graphs. There’s no rescaling of the numbers: both published indices are scaled to 100 in 2000. Japan Urban Areas saw land prices rise 225% in the 10 years from 1981 to 1991 and then fall 39% in the 3 years to 1994 and 65% by its lowpoint in 2005. The San Francisco MSA saw its prices rise 225% (exactly the same number) in the 10 years from 1996 to 2006 (I used the rate in January each year) and 35% in the 3 years (well, 2 years and 11 months) since. The chart reflects accurately what actually happened.
I am surprised no-one has complained that I used nominal values instead of real (inflation-adjusted ones). A pity really because that tells an interesting story too: Japan rose faster than SF during the ten-year run-up (164% to 153%) but SF has fallen faster over three years (-43% to -41%).
Case Shiller actually rated SF as the second best in terms of decelleration last month:
http://finance.yahoo.com/real-estate/article/106645/10-Best-and-10-Worst-US-Housing-Markets