During the epic housing bubble, people took if for granted that housing prices would continue to rise indefinitely. By the time housing values peaked in 2006, prices had been in an almost vertical rise since 1998 and it was widely believed that you “can never go wrong buying a house.” Home buyers’ perception of future values became totally focused on the rear view mirror.
Yet six years after the housing markets started to collapse in 2006, values have declined nationally back to the price levels of mid 2003. On a national average price basis, anyone who purchased a home since 2003 has seen zero appreciation. Where do we go from here? An equally elegant argument can be made for why this is a great time to purchase a home and why it is the worst time.
Trying to figure out where housing prices will wind up over the next decade is a fool’s game. Everyone needs a place to live and owning your own home carries with it certain intangible benefits along with the possibility of future price appreciation.
Homes have become affordable again for the average American worker and this is one of the hidden benefits of the drastic price correction since 2006. The combination of lower home prices and record low mortgage rates have made homes more affordable to the average American family than ever before. Houses have become so affordable, in fact, that the average family could actually afford to buy two houses. Most Americans lacked common sense during the bubble years, purchasing more home than they could afford. Today, homes are more affordable than ever before, yet many Americans are reluctant to buy a house – go figure.
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