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Nikkei and Dow comparison,1990 and 2002, page-2

  1. 4,941 Posts.
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    Hi Croupier,

    I will leave to another time to comment on your wider comparative observations of the Nikkei of 1990 and the DOW of 2002 which I found interesting.

    For the time being, however, I want to concentrate on your observation of "US....real estate to unreal levels".

    As has been the case in Australia, US housing prices have been rising for some time. But, have they risen to unrealistic levels, such as those which were evident in Japan in the late 80s. In my view, the answer to this question is, no.

    In 1972, the median priced existing single family home in the US was worth $US 26,700. This was at a time when the US median family income was $US 11,116.

    By 1981, the median priced existing single family home rose 2.5x in value to $66,400. In the same time period, the US median family income had doubled to $22,388.

    By 1991, the family home had risen a further 0.5x to $100,300, whilst the median income rose at a similar rate (ie: 0.5x) to $35,353.

    In January 2001, the comparative figures were $137,100 (and $50,982).

    By April 2002, these figures had risen to $153,300 (and $53,342).

    In Australian dollar terms, the median US home price in April 2002 was ~$280,000 (and $95,000).

    In terms of fixed housing affordability, this peaked in the Staes in 1972 (@154.8), dropped to 68.9 in 1981, rose again to a peak of 142.3 in February 2001, and is currently tracking 132.5 in April 2002.

    Conversely, mortgage payments as a percentage of income peaked in 1981 (@36.3%), troughed in 1972 (@16.2%), tracked 17.6% in February 2001, and is currently sitting @18.6% in April 2002.

    As a multiple of income, the ratios were 2.4x in 1972, 3x in 1981, 2.8x in 1991, 2.7x in 2001, and 2.9x in 2002.

    Based on this analysis, I doubt that the US housing boom is out of control.

    If anything, the housing boom frenzy has been more pronounced in Australia, than in the USA, particularly with today's Sydney media suggesting that the median house price in Sydney will soon eclipse the $400,000 mark (or ~$US 220,000). And, this is in an environment where neither AWE /AWOTE have yet ecilpsed the $50,000 mark.

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