Will House Prices Ever Recover?
In an article last week on SmartMoney.com, author Jack Hough made some surprising, almost inconceivable, predictions and observations regarding the U.S. housing market. His hypothesis is that housing prices will never recover to pre-recession levels.
According to the latest S&P/Case-Shriller reports, home prices in 20 major markets across the U.S. have declined 3.5% over the past 12 months (through February). That means prices are back to 2002 levels, and when inflation is factored into the equation, back to 1998 levels.
The big shocker: Hough points out that when subtracting inflation, home prices can also be compared to those in 1986, 1955 and 1895. That’s due to the fact that the natural rate of price appreciation for houses is zero after inflation.
The Moral of the Story
Hough points out that just because house prices may not return to their peak levels doesn’t mean people should stop buying. He predicts that prices will eventually stop falling and start rising; however, they are unlikely to start rising faster than inflation.
What’s Your Theory?
Do you agree with Hough’s prediction that home prices won’t recover? If not, what do you anticipate happening with the market, and when do you expect them to recover? Share your thoughts with us!