—The Economix blog at The New York Times adds to the housing debate, with a clear, useful lesson in the new normal when it comes to house prices. It might not be what every homeowner wants to hear, or what that Fannie Mae survey says people think.
It has been 10 months since prices stopped their free fall, and there is a lot to like in price stability — not only relative to prices crashes but also relative to price booms. For years, many American homeowners persuaded themselves that real housing prices should rise year in and year out, but there is no reason to either expect or hope for perpetual price gains.
The post, by Harvard economics professor Edward L. Glaeser, explains why, even though houses are assets, they doesn’t mean that, on average, they should appreciate, like stocks do. “Houses pay hefty dividends to their owners in the form of living space — that’s the real return on housing investment — and the basic economics of housing doesn’t point to perpetual price growth.”
There are metro areas where prices have steadily risen over time, and the post helpfully explains why. But the message for the rest of the country is clear: Don’t count on it.
The housing bubble may by now be old news. But it’s good for readers to get a clear analysis of what to expect next.