Monday, March 03, 2008

Your House as an Investment

My grandfather never thought of his house as an investment. It was where he lived. He built it to last and it does some 85 years later, but he never would have considered it as something that would hopefully go up in value. Houses didn’t do that, they started going down in value as soon as you finished them.

His grandchildren have a different thought on housing, or at least they did until recently when we saw the top in residential real estate values in all of the hottest real estate markets of the past decade and more.

I’d tried to find some historical data on housing values when I was doing a recent Agurban e-zine, but didn’t find it until after I’d finished that piece. This graphic from a recent Business Week shows that from 1890 until 1945, except for a few brief periods of time, a house lost value. It wasn’t until after WWII that housing started to not only hold its value but actually increase in value. The sharp spike upward in about 1998 sure looks like an anomaly to me and we could see a continuing downward pressure upon housing values if they return to a more normal trend line.


Matt H. said...

It stands to reason that Baby Boomers created the surge post WWII. As Boomers retire out of their homes would it also stand to reason that there will be a large number of homes for sale? Thus a decline in home prices?

BoomtownUSA said...

The one salvation is that the Millennial Generation (ages 10 to 27) is the same size of the Baby Boomers and could help to temper any decline.

I also don't think that the Baby Boomers are necessarily going to be "retiring" like their parents in the Greatest Generation. They are going to retire from one job and move onto another. With their life expectancy, who wants to golf for 40 years?