Real estate experts in the U.S. suggest houses are now a bad investment, indicating there is no law to say real estate will appreciate in value.
For a century prior to the great housing bubble that started in the 1990’s, house prices only appreciated in line with inflation. This ensured your great grand parents paid the some portion of their household income for housing, that your grandparents did, and that of the baby boomer generation. But then in the late 1990’s, something changed. The experts said real estate only goes up, some suggesting that house prices double every 7 to 10 years. With access to easy credit, this fueled one whopper of a housing bubble around the world.
Now that the bubble has burst, experts agree with Stan Humphries, chief economist for the real estate site Zillow saying house prices will only go up with inflation. “There is no iron law that real estate must appreciate, All those theories advanced during the boom about why housing is special — that more people are choosing to spend more on housing, that more people are moving to the coasts, that we were running out of usable land — didn’t hold up.”
Dean Baker, co-director of the Center for Economic and Policy Research says “People shouldn’t look at a home as a way to make money because it won’t”. He estimates it will take 20 years to recoup the $6 trillion USD of housing wealth lost since the start of the housing crash in 2005.
» Housing Fades as a Means to Build Wealth, Analysts Say – The New York Times, 22th August 2010.
» Now They Tell Us: Experts Say Housing Is A Lousy Investment And Always Will Be – Yahoo Finance, August 23, 2010.