Like many people, I bought my first house thinking it would go up in value every year. I suppose that expectation was supported by living in Phoenix where people were getting 25-50% or more, return on their investment over the last 15 years. This real estate frenzy in places like Phoenix and Las Vegas created an bubble that has now burst. What goes up must come down. Many experts say that our expectations around the value of our homes are completely unrealistic.
Dean Baker, co-director of the Center for Economic and Policy Research, estimates that it will take 20 years to recoup the $6 trillion of housing wealth that has been lost since 2005. After adjusting for inflation, values will never catch up.
“People shouldn’t look at a home as a way to make money because it won’t,” Mr. Baker said.
For more read this recent NY Times article: http://www.nytimes.com/2010/08/23/business/economy/23decline.html
This shift will have long term impact in how many of us will face and plan for the next twenty years. If owning a home is no longer a viable way to build your financial portfolio then what needs to happen for millions of baby boomers who were counting on that as part of their financial planning and retirement? It is questions such as this that opens the door for other ways of thinking about our living situations.