The Valor Blog.
Investment News and Views, Direct from Our Team.

Reversion to the mean

Those who understand economics understand reversion to the mean is a brutal force. The likely-hood that property reverts to its long term mean over the coming years is increasing at a rapid rate with the end of the commodity boom upon us. The long term mean for housing values to GDP is closer to 1.5 times the size of the economy. Australia is very close to Japan’s record of 3.8 times. The U.S. got to only one times the size only three years ago.

It it is more likely that houses revert to the mean than not from this point in time. This leaves only one conclusion:


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