Joness –
I like your chart of the Japanese housing a bit better. The Economist version uses land prices, not housing – which is not totally representative. I pulled it more for the interest rate policy comparison than for the housing comparison.

If you have the data underneath that “6 largest cities” line it would be interesting to make our own comparative version

Yeap, nothing better to tackle smoking, than to make cigarettes cheaper.

Your House Prices graph shows the U.S. correcting dramatically faster than Japan and having ran up a lot higher. However, if you look at the 6 largest cities in Japan, you’ll notice they ran up and corrected at a rate more similar to the U.S. This makes me wonder if we are not in line for a little faster correction initially with the overall trend still remaining down for many years to come?

Japan Bubble

One thing I do notice is the higher the prices get out of whack, the faster they correct.

http://media.economist.com/images/20080823/CFN7601.gif

I know its true because I read it in the news: Fed Cuts Rate to 1% to Avert Prolonged Recession

See: http://www.redfin.com/WA/Issaquah/4350-W-Lake-Sammamish-Pkwy-SE-98027/unit-135/home/6016

Condos going for the high $200Ks is not a reasonable price. In 2004, this condo sold for $190K, which is more reasonable. If people would just list at prices close to the 2004 numbers, then I think people will start buying. With banks now having higher credit requirements, the recession, and the upcoming mortgage reform, the pool of people willing and able to buy has shrunk and will continue to shrink. I think it would be in the best interest of sellers and realtors to accept the fact that the pool of buyers has permanently shrunk and price accordingly.

From the methodology pdf:

For the purpose of constructing the three tier indices, price breakpoints between low-tier and middle-tier properties and price breakpoints between middle-tier and upper-tier properties are computed using all sales for each period, so that there are the same number of sales, after accounting for exclusions, in each of the three tiers. The breakpoints are smoothed through time to eliminate seasonal and other transient variation. Each repeat sale pair is then allocated to one of the three tiers depending on first sale price, resulting in a repeat sales pairs data set divided into thirds.

Can you provide a link to, or describe for me, what constitutes the parameters for the tiers? If it is sold price, what are the price breaks from tier to tier?

“It is difficult to get a man to understand something when his salary depends upon his not understanding it.” Upton Sinclair

On another note, just a public shout out to Seattle Bubble for saving (and making) me untold amounts of money in this once in a lifetime housing event. This blog and the people who comment here have been consistently ahead of “the professionals” at every step of the way. As another aside, do you think most of the talking heads actual believe what they are saying/writing or is it just part of their job?