Chart of the day: Case-Shiller 2005

By Edward Harrison On Jun 2, 2008

Question: Could one see a bubble in housing back in 2005 when house prices were still rising?

Well, to answer that question, I took the S&P/Case-Shiller Composite 10 Index and mapped it the rate of inflation. See, Robert Shiller, one of the Case-Shiller index authors, said in his seminal book Irrational Exuberance that house prices over the long-term have grown a tad more than the rate of inflation. So, you’d expect house prices to rise about in line with the Consumer Price Index (CPI).

Let’s look at the 10 years of Case-Shiller vs. the CPI from Jan. 1995-Jan. 2005. What do you think?

Edward Harrison 7783 posts 575 comments

Edward Harrison is a senior Editor at Bloomberg. He is also the founder of Credit Writedowns newsletter, a former career diplomat, investment banker and technology executive with over twenty five years of business experience. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College.

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