CPI is a crock that’s been sliced and diced by the gov’t to keep the headline inflation number low. Does anyone believe that CPI is running at 3-4%? Of course not, because the gov’t has come up with CPI “core” inflation which strips out food and gas. I’m sure that everyone will be glad that the gov’t says that CPI is running at 4% as they spend double for gas vs what they were paying a year ago. Take a look at commodity prices and building material prices. They’ve increased way more than 4% per annum, that should also factor into RE prices.

Another factor that’s going to be favorable for places like Arcadia is that the number of desirable, safe places to live has been greatly reduced the last 30 years. Places like the SFV, Lawndale, Gardena etc were OK middle class cities 20 years ago. Today, they’ve all gone to hell. Anyone that has money are all looking for houses in the same neighborhoods that you can fit on one hand. Fewer decent neighorhoods =’s lower supply which should also help RE prices in places like Arcadia. Finding a cheap house is easy. Finding a decent house centrally located, safe and with good schools is still hard.

Of course, feel free to add “california tax”, “sunshine tax”, “they aren’t making any more land tax”, and whatever else you would like.

But I would argue that ultimately, housing has to be affordable (in relation to income) for anyone to buy it (and not lose it to the bank).

3X to 4X income.

And since only incomes of the top 10% of earners has increased in the past 20 years, that means that houses should be priced by CPI, unless the house is likely to be purchased by someone in the top decile of incomes.

But I would like to hear your thoughts on why oil and population growth should be factored into the price of an old house in Arcadia.

Thanks

(http://www.westegg.com/inflation/infl.cgi)”

You want to peg RE appreciation to CPI????? Like the price of oil, oil products and population growth does not enter in the supply/demand equation?

I do not specfically profile “good” or “bad” properties and usually just pick one of the newest listings on Redfin. It just so happens that the last 6-8 homes are located in undesirable areas!

(http://www.westegg.com/inflation/infl.cgi)

then add $50k for the upgrades.

so my prediction is $100k shy of George8’s, $358k in 2011