The good old days are gone, if you buy a house you better like it and want to stay.
May 1, 2012, 12:26 p.m. EDT
By Jack Hough
Why U.S. house prices won’t recover
When will U.S. house prices recover? Likely never. But that’s no reason not to buy.
Taking inflation into account, home prices are down to 1895 levels
The latest S&P/Case-Shiller numbers, reported last week, show that prices in 20 major markets declined 3.5% over the year through February. They’re now back to 2002 levels. If we subtract for inflation, they’re back to 1998 levels.
But consider: After subtracting for inflation, prices are also back to 1986 levels. And 1955 levels. And 1895 levels.
That’s because the natural rate of price appreciation for houses is zero after inflation. Prices will eventually stop falling. They’ll resume rising. But over the long term, they’re unlikely to resume rising faster than inflation.
That’s why prospective buyers should stop focusing on the vague hope that house prices will jump from here and focus instead on the functional value houses provide for the money. In most markets, they provide enough of that to make buying a good deal.