When will U.S. house prices recover? Likely never. The latest S&P / Case-Shiller numbers, reported last week, show that prices in 20 major markets declined 3.5% over the year through February. They're now back to 2002 levels. If we subtract for inflation, they're back to 1998 levels. But consider: After subtracting for inflation, prices are also back to 1986 levels. And 1955 levels. And 1895 levels (see chart). That's because the natural rate of price appreciation for houses is zero after inflation. Prices will eventually stop falling. They'll resume rising. But over the long term, they're unlikely to resume rising faster than inflation.
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