Real house prices flat over long-term

[cd27]

What all the losers who bid up house prices can't understand,

http://www.rgemonitor.com/us-monitor...housing_bubble

"But as Shiller argues, the belief that real housing prices rise over time is false, the evidence suggests that real housing prices are relatively flat over the long-run. Because people expected prices to rise on average when they should have expected them to remain flat, the correction - the variation in prices - was far larger than anticipated and many homeowners weren't able to simply ride out the short-run variation like they thought they would be able to do.

But this still leaves a question unanswered. Why did people have this false belief about the long-run trajectory of prices? Shiller explains that this happened because people believed that both land and building materials were becoming relatively more scarce over time, a belief he says is false, but that just pushes the "but why did they believe that" question back one step from housing prices to the prices of land and raw materials."

this, of course, implies massive downward pressure on house prices over next 10 (or more) years. That the housing market was a pyramid scheme is why you hear so many idiots complaining about people talking down the market because once the last person refuses to buy the whole ridiculous edifice collapses.

[toughbutfair]

Even without the "bubble" element, house prices deserved to rise in value from the mid 1990s

Incomes went up, taxes went down, interest went down, immigation started, population went up, demographics had lots of people in mid 20s, etc

It is foolhardy to think that 100% of the rise was a bubble just because things are bad now.

Over the next few years all the above (not sure about demographics) will reverse so prices will correctly drop.

[cd27]

yeah, prices were below average in early 1990s...and quickly rose above long-term average, and then quickly rose again, and again, and again.....need I go on

[toughbutfair]

I would guess the rise to the turn of the century or so was all warranted and then we got into buble territory from 2002 (at the latest)

[cd27]

I don't have actual figures but I'd say overheated around 2000

[Simbo67]

I would guess the rise to the turn of the century or so was all warranted and then we got into buble territory from 2002 (at the latest)

Agree with this.

[todaytonight]

The price of any asset is directly related to the income it can generate
- During the Celtic Tiger years (1995 - 2002) rents were rising so property prices duly rose in line.
- During the Post Celtic Tiger Bubble (2002- 2006) Rents flattened but property prices accelerated.
Result, big gap that will naturally close......problem is now rents are falling so gap is widened

[toughbutfair]

I've been renting out my car space for 150 a month for the last year, the guy is moving but I believe the rent will be less than half that now.

C'est la vie.

[PresidentLee]

The price of any asset is directly related to the income it can generate
- During the Celtic Tiger years (1995 - 2002) rents were rising so property prices duly rose in line.
- During the Post Celtic Tiger Bubble (2002- 2006) Rents flattened but property prices accelerated.
Result, big gap that will naturally close......problem is now rents are falling so gap is widened

Best synopsis I've seen of what happened.
This is, in plain English, what David McWilliams and George Lee have been saying for 5 years now

[sandar]

they go up and unders supply and down with over supply. Simple. In ireland demand rocketed, supply couldnt keep up for a while, then the reverse happened. Popuklatiob factors etc are useful in anticaptaing how they are going to go in future