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Tuesday, July 29, 2008

Case-Schiller - May

I previously detailed that CPI may overstate inflation for an individual who:

  • does not own a home
  • would like to own a home
  • will likely soon buy a home
as it does not include how "affordable" housing has become with the recent price collapse for non-homeowners (full details here).

As can be seen below, the Case-Shiller Price Index remained negative (year over year) as today's Case-Shiller release shows further deterioration, with the Composite 10 dropping over 16% year over year.

In looking at the Composite 10's five year returns (annualized), even after the huge downturn in prices, returns over the most recent five year period are still positive at ~4.5% / year and indicates there may still be room for further deterioration.