For a great read, check out the Wall Street Journal today and their section on “The Future for Home Prices”. It presents a fair and balanced look at real estate and give equal time to the “real estate is a great value over time” people and the “baby boomers have ended the real estate run” people.
Over the past few years, Americans have had a brutal lesson in the risks of real estate. House prices have crashed more than 35% in some parts of the country, millions of people are losing their homes to foreclosure, and banks are failing.
The takeaway? Many Americans still see real estate as their best shot at wealth. In survey after survey, people expect prices to bounce back — in some cases, as soon as six months from now.
Those hoping for a quick rebound are likely to be disappointed. Economists and other pros generally say home prices won’t bottom out before the second half of 2009, and some don’t see a bottom until 2011 or 2012. Even when they stop falling, prices may scrape along the bottom of the rut for years.
Down the Road
And longer term? Over the next 10 to 20 years, housing economists expect prices will rise again — but, on average, probably not nearly as much as they’ve averaged over the past decade. That isn’t to say that some places won’t experience booms (and busts). But, the experts say, you should generally expect house prices to rise just a bit more than inflation and roughly in line with household income.
Karl Case, an economics professor at Wellesley College whose name adorns the S&P Case-Shille ....Read More
