“I have no idea what you mean by that other nonsense.”
Of course you don’t, or you wouldn’t call it nonsense.
“A house is “worth” exactly what a buyer is willing to pay and a seller is willing to accept in an arm’s length transaction (ie., neither party is under unusual duress).”
Yep, and the goverment subsidizing loans, and forcing mortgages on banks pushed prices higher by manipulating them. There was a 116 year study by a (Yale, I think), economist in 2006, studying housing prices from 1890, to that date. He factored our inflation in the price of housing. Standardizing the cost of a “normal” (Standard single family home), as $100K in 1890, he tracked the price of housing for over a century. The price of a house remained at a standardized $100k for nearly the entire 116 years.
There was a 30 year dip (to about $70K if translated to 2006 dollars), during the early 1900’s when the process of manufacturing a house was made more efficient. There was one spike in the 70’s and one in the 80’s returning back to the 100K standard afterward. Starting in the 1990’s, the curve shot up exponentially.
If you care to be educated on the matter, go look up the study. Robert J. Shiller is the economists name.
The old (My father, 67, was taught by his father, so it’s at least close to a century old) adage that a house should be worth about 2x one’s gross annual pay. In 2006, that would have been about 95k (close enough to the 100K benchmark for me). Anything more than about 2x one’s annual income is more than a person can afford, as shown by nearly a century and a quarter of data. The fact that people ignorant think a house is an “Investment” (Meaning it’s going to increase in “value”—they mean price— more than the value of their dollar) is misguided, and to be honest, stupid. Houseing prices remain stable or go down over time, not up. If they go up it’s because the dollar drops, or the market is manipulated. There are millions upon millions of houses inoversupply, and as people move back in, there will be more and more. And the value thankfully, will continue to plummet and come out of it’s bubble.
A house is meant to be a dwelling, not a monetary vehicle. I feel bad for those duped into the idea that they ould somehow “make money” (other than an equivalent rise due to inflation) on their home, just for buying it. Now they’ll learn that it was a silly notion.
P.S. I’ll excuse my own typos, I’m too busy to proofread at the moment.
That “study” sounds just like the ridiculous kind of exercise an academic would do. I do agree that prices spiked from the late ‘90s to the mid 2000s, but this was a direct result of that silly old “supply and demand” thing again. Yes, demand was artificially boosted through government and Wall Street corruption and that caused the relatively limited supply to command higher prices.
Prices will level off when the economy reaches some degree of stability, and supply and demand return to historical “normal” levels and cycles. At that point, houses will, as always, be “worth” exactly what a buyer is willing to pay and a seller is willing to accept in an arm’s length transaction. That’s Economics 101.
FRegards,
LH