On 31 Oct 2013
So, Do You REALLY Think We Are At The Bottom???,
Looking at historical inflation-adjusted values of homes alone is not the correct methodology. You must also consider rental rates. Rental rates, IMO, is the real way to value a home.
Much of the housing "recovery" is because house prices were a relative "steal" for investors to rent out. Ex: Buy a home/condo for $30,000 and net $500/month AFTER expenses and taxes. So at $6,000/year return on a $30,000 investment, they were pulling in 20% annually which is great. A whole bunch of investors jump into real estate, it becomes a feeding frenzy, and pretty soon that home which was $30,000 in 2010 is now $120,000 in 2013 and only yielding 5% annually. The frenzy cools off.
Because much of the "recovery" was investor-driven (rather than buyers drinking realtor koolaid), I think prices will level off and track rent, at least for the short-term. If rents increase, home prices will increase. If rents decrease, home prices will decrease.
There are some areas with manias that are sellers' markets (ex: California) and other areas where there are still relative deals for buyers (parts of Midwest/Rustbelt) but the norm for most of the country right now is buyer-seller equilibrium.