Everyone and his uncle thinks he knows what’s going on with the real estate market.
At least half of those people are wrong.
My best guess is that, over the coming year, or years, home prices will fall, as more sellers race after fewer buyers.
At the same time, interest rates will rise, due to concerns over inflation, causing some of the price improvement to be simply “illusionary”.
What do the experts think?
[T]he boom in house prices was largely a result of the appeal of â€œsuperstar citiesâ€? like New York and San Francisco that are unlikely to lose their allure. In much of the rest of the country, prices are not unusually high, considering the relatively low interest rates.
Moreover, few borrowers are falling behind on their mortgage payments, and the economy looks fairly healthy outside of housing. So if prices start falling, new buyers may jump into the market and prevent any extended slump. â€œThe fundamentals of real estate are solid, still,â€? said James Gillespie, chief executive of Coldwell Banker, the real estate company.
Which is it, then â€” a brief pause, or a big correction?
â€œEither argument is very compelling. I can debate myself on it,â€? said Mark Zandi, chief economist at Moodyâ€™s Economy.com. â€œThatâ€™s why thereâ€™s a great deal of uncertainty.â€?
Or, put another way: They don’t really know.
(The article includes a graph put together by Robert J. Shiller, Mr. “Irrational Exuberance”, himself. It’s an interesting graph, showing that the sales price of a home has increased, 100%, over the past several hundred years. Interesting, but it would be more helpful if he had also charted mortgage loan interest rates, so we could see when the monthlycost of paying for a home changed, over the years.)
Source: Read Between All Those For-Sale Signs – By David Leonhardt and Vikas Bajaj, The New York Times