Sunday, October 5, 2008

Real Estate

Yes, it was a massive bubble and no, it's not coming back. Your house is no longer an "investment," it is a liability and place for shelter. If you're waiting to buy at the current "great" prices, keep waiting. We're going down further - MUCH further. A few charts for visual illustration. The first is from Robert Schiller, an economist, and shows inflation-adjusted home values. This chart is a little outdated and the downturn from the current peak is obviously already underway.

The second chart is the Japanese experience with real estate, which for them peaked at the same time their stock bubble did - right around 1990. I copied this chart from another blog but can't remember where I got it.

Interpretation: expect real estate price in the U.S. to do a retrace all the way back to year 2000 prices. Here is a look at the Nikkei stock market, Japan's major exchange, from 1980-2008, with an overlay of the NASDAQ (our main bubble stock market that burst in 2000). Think 10 year lag but same ultimate outcome. History doesn't exactly repeat, but it does rhyme, eh?

Wikinvest Wire