How Long Until The Real Estate Market Recovers?
People always seem to be asking, "When will real estate bounce back?"
We've heard all kinds of experts predicting a just-around-the-corner recovery for prices. Problem is, all the predictions have been wrong.
Now there's a new view of real estate recovery being advanced by a well-known economist and author from Yale University, Robert Shiller. I thought I'd pass along Shiller's views, as best as I understand them anyway.
Shiller has taken an historic look at real estate prices since the 1890's and charted the price of an average house with adjustments for inflation and the like. He has found some interesting trends.
If you bought an "average" house in 1908 -- exactly 100 years ago -- you would have had to wait until 1946 to recover your money. That's right, it would have taken 38 years of mostly down markets to get your original investment back.
Had you purchased a house in 1953, Shiller's charts show that you would have had to slog your way through a series of rising and falling and rising and falling real estate markets until 1978 to get your original purchase price.
The thing is, people didn't count much on making a killing in real estate back then, so they didn't much care about the price of their house. The house was, first and foremost, shelter. It was something to be used. A place to live and raise the family. It was not really considered a money-making investment.
It is only in the most recent years that real estate has begun to be looked at as an investment for turning a tidy profit. Shiller thinks that is because something basic has changed in America's goals. We have become, according to Shiller, an "investing culture". The family home is not just shelter anymore, it's become a money-making investment. Since it is an investment, it is likely going to be subject to volatility, like a stock purchase. What's more, Shiller thinks this volatility in real estate is likely to remain the way of things for the foreseeable future.
How long?
Shiller can't say. But for the past one hundred years real estate has actually remained pretty flat when you look at the big chart. It dipped badly during the depression and stayed there until after the Second World War. Then it returned to pre-depression prices. It dipped again in the 1950's but went back up in the late 1970's to that same pre-depression level on the 100-year chart.
It has only been in the last eight years that we have seen real estate's value skyrocket and take us to where we are today. What's going to happen next? Shiller isn't sure. This is uncharted ground.
He does point out, however, that Japan may hold an answer. Like the U.S. today, Japan had a huge rise in real estate values a few years ago. Prices shot up like crazy. Then, prices dropped and the real estate market in Japan became depressed. The thing is, the Japanese real estate market stayed depressed for fifteen straight years. Fifteen! It has only been in the past year or so that the Japanese real estate market has started to climb upward -- and that climb has been painfully slow.
So, Shiller isn't giving property owners any good news with all his charts and graphs and articles and predictions. At least he's admitting the truth: this is something new and nobody knows when this "correction" is going to improve. Maybe around 2023?
Oh, here's an investment tip. Since Japan's real estate has been depressed for so long and is just now starting to move up in value, it might be a good time to buy into a REIT specializing in Japanese real estate. You know, buy low sell high. You could use that $600 the IRS is going to send your family so you can help save the entire American economy.
For more information on real estate in the Tampa Bay area, visit my website at http://www.thestpeterealestatesite.com/.
We've heard all kinds of experts predicting a just-around-the-corner recovery for prices. Problem is, all the predictions have been wrong.
Now there's a new view of real estate recovery being advanced by a well-known economist and author from Yale University, Robert Shiller. I thought I'd pass along Shiller's views, as best as I understand them anyway.
Shiller has taken an historic look at real estate prices since the 1890's and charted the price of an average house with adjustments for inflation and the like. He has found some interesting trends.
If you bought an "average" house in 1908 -- exactly 100 years ago -- you would have had to wait until 1946 to recover your money. That's right, it would have taken 38 years of mostly down markets to get your original investment back.
Had you purchased a house in 1953, Shiller's charts show that you would have had to slog your way through a series of rising and falling and rising and falling real estate markets until 1978 to get your original purchase price.
The thing is, people didn't count much on making a killing in real estate back then, so they didn't much care about the price of their house. The house was, first and foremost, shelter. It was something to be used. A place to live and raise the family. It was not really considered a money-making investment.
It is only in the most recent years that real estate has begun to be looked at as an investment for turning a tidy profit. Shiller thinks that is because something basic has changed in America's goals. We have become, according to Shiller, an "investing culture". The family home is not just shelter anymore, it's become a money-making investment. Since it is an investment, it is likely going to be subject to volatility, like a stock purchase. What's more, Shiller thinks this volatility in real estate is likely to remain the way of things for the foreseeable future.
How long?
Shiller can't say. But for the past one hundred years real estate has actually remained pretty flat when you look at the big chart. It dipped badly during the depression and stayed there until after the Second World War. Then it returned to pre-depression prices. It dipped again in the 1950's but went back up in the late 1970's to that same pre-depression level on the 100-year chart.
It has only been in the last eight years that we have seen real estate's value skyrocket and take us to where we are today. What's going to happen next? Shiller isn't sure. This is uncharted ground.
He does point out, however, that Japan may hold an answer. Like the U.S. today, Japan had a huge rise in real estate values a few years ago. Prices shot up like crazy. Then, prices dropped and the real estate market in Japan became depressed. The thing is, the Japanese real estate market stayed depressed for fifteen straight years. Fifteen! It has only been in the past year or so that the Japanese real estate market has started to climb upward -- and that climb has been painfully slow.
So, Shiller isn't giving property owners any good news with all his charts and graphs and articles and predictions. At least he's admitting the truth: this is something new and nobody knows when this "correction" is going to improve. Maybe around 2023?
Oh, here's an investment tip. Since Japan's real estate has been depressed for so long and is just now starting to move up in value, it might be a good time to buy into a REIT specializing in Japanese real estate. You know, buy low sell high. You could use that $600 the IRS is going to send your family so you can help save the entire American economy.
For more information on real estate in the Tampa Bay area, visit my website at http://www.thestpeterealestatesite.com/.
-30-
posted by Terry Ward at 8:35 AM
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