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...
In a poll of 2,000 adults, real-estate-data provider Zillow.com found that 61% believed the value of their home would either remain level or rise over the next six months. Another survey of more than 1,000 homeowners, sponsored by real-estate-services firm Realogy Corp., found that 91% thought that owning a home was the best long-term investment they could make. And an online survey of 5,000 people commissioned by Citigroup found that just 32% believed it was a good time to invest in stocks -- but 51% said it was a good time to buy a home.
Karl Case, an economics professor at Wellesley College whose name adorns the S&P Case-Shiller home-price indexes, has studied U.S. house prices going back to the 1890s. Over the long run, he says, home prices tend to increase on average at an inflation-adjusted rate of 2.5% to 3% a year, about the same as per capita income. He thinks that long-run pattern is likely to continue, despite the recent choppiness.
The only reason that homes have ever been a reasonable"investment" is that they were a forced, lleveraged savings account for many people, who stuck around for a long time. Of course, most of those people didn't buy at Ponzi-scheme prices years ago. Now, everyone still seems to be conned by the snake-oil salesmen like Yun at the National Association of Realtors, and they think that homes can somehow, magically appreciate at 10% per year, despite the fact that wage growth has been flat or negative.