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Why home prices may never recover

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  • Why home prices may never recover

    Why home prices may never recover

    The home-price optimists insist prices are bound to return to their 2006 peaks. But there is no reason to think they have to. And if they continue to fall, Americans' relationship to their homes could change dramatically.

    [Related content: mortgage, investments, housing, real estate, home buying]
    By Mark Gimein, The Big MoneyTwo years away from the peak of the great housing bubble, the talk has turned to whether we've reached a bottom. And whenever there is talk of a bottom, there is the inevitable talk of recovery, the speculation about just how long -- five years? 10? -- it will take for us to get back to where we were.
    Even at this point, the idea that there is simply no going back -- not for decades -- is still hard to stomach for Americans who have never seen or imagined a more or less permanent drop in value of housing.
    It's time, however, to start thinking about the likelihood that even when the worst of the financial crisis is over, the downward trend in housing prices will persist.
    The belief that to own your home and your land is to assure your future is near universal.
    It predates our times by many years -- it sent the homesteaders into the hard ground and dry plains of the West. And in the second half of the 20th century, the confidence that home ownership equaled security was consistently rewarded.
    Thanks to the invaluable work of Yale economist Robert Shiller we know that since the First (yes, that's the first) World War, there have been two dramatic upticks in home values -- one in the 1940s and a second in the last 10 years.
    The last sustained fall came close to 100 years ago.

    "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx

  • #2
    There is a lot of possibility this is going to be the case. Extremely uncertain times ahead for property values in Western society. We've had peaks and toughs before but never with so many indicators questioning whether continued economic growth is likely for the West.

    Very uncertain times indeed. It's good to be optimistic, but there is also reality.


    • #3
      the japanese experience has been slow falls for 15 years then a slight rise, but the recent round of bad news killed that

      so prices here are about 1987 levels

      this is all pretty much what the longest study of RE prices would indicate, story from 2006



      the choice seems to be between slight falls for many years with low inflation 2%?


      stable RE prices with highish inflation 8%?
      have you defeated them?
      your demons