patrick.net

Honestly, it is anyone's guess. Under free market conditions, we might be able to hazard a guess. The market is anything BUT free right now. We do know that the forces manipulating the market are generally trying to push prices in an upward direction, and they are having some success at it just by brute force. I think that sustainable increases in prices require the repair of our economy, increased wages and less publicly held debt, overall. Those things are simple to list, but each has a lot of very complicated things going on within them, and some serious implications if they come to pass.

There are still some wild-cards waiting on the horizon, such as baby boomers hitting retirement age, how our government deals with the debt ceiling issue again (and government spending has a very direct impact on our economy right now), rising energy costs as we lose our ability to keep oil cheap through military force and at least one whole generation saddled with massive student loans and college degree that has no way to pay them off.

In the short-term, I would not be surprised if prices got juiced up again. The stock market is a casino (and retail investors are fleeing in droves as HFT algo's are making it much too dangerous of a place for humans), bonds have crap for returns, cash returns far less than inflation and gold isn't all that easy to deal with. All that is left, as far as investors are concerned, is RE rentals since those seem to be beating inflation and are more certain than the stock market.

bmwman91 says

Honestly, it is anyone's guess. Under free market conditions, we might be able to hazard a guess. The market is anything BUT free right now.

Exactly. Under normal circumstances without the government trying to destroy the economy, then certainly no 10% appreciation.

Today's self-destructive economic policies? Possibly.

I expect no more or no less appreciation than commiserates with wages.
Mid eighties through late 90s wages were stagnant so were home prices.
Late 90's more folks were making 100K+ RE went bazonkers.

IMO they are going to keep lowering mtg rates, stall foreclosures, letting people squat for free forever, and doing loan mods galore UNTIL prices get back to near bubble peak.

You see, when 'everyone has equity' in thier home (1996-2006 this was true) then the banks do not let you live free for years in a house with equity. Only the underwater loanowners get to enjoy that special welfare.

Jobs dont matter unless half the population cant work, lowering rates and money printing determine price. If unemployment hit 50% then we can live well like that also - we just let those people get on S-8, or squat in a home while they lower rates and print money.

Yeah, its crazy here.

I certainly hope we never see 10% appreciation again. In fact, I hope we never see appreciation of any kind -- zero inflation and zero increases in RE.

For every additional dollar in a house's selling price, that's one dollar less in purchasing power for the person, probably younger than the seller, who's buying it. Long-term appreciation in RE thus basically amounts to a subsidy from younger people to older. The only stable long-term (as in multi-century) trend is for consumer prices and real estate to both be perfectly flat, with each individual home's price determined only by demand for it specifically.

Related question to ponder: is there anything good at all (for society as a whole and not just for Boomers who got in when it was cheap) about the annual near-10% "appreciation" in the cost of a college education over the last 20 years? What if RE had gone exactly the same way, with no declines? Everyone (rightly, in my view) sees the former as a disaster and a form of generational theft. Shouldn't overpriced RE be seen the same way?

Agreed.

Most things that appreciate are rare or scarce....

Exactly. Maybe cause the land is scarce...?

Over 10% per year after 5 years?
Over 10% total after 5 years?

Its true. Being an LL blows.

Housing to the moon for all I care, not sure where the money is coming from, except historically low interest bank loans, lots of foreclosures and short sales to be had yet, just pick your neighborhood carefully, investors buying up for renting is pretty popular right now, popular enough that they are building quite a few more rental complexes in the city I live in.

Not sure about Chicagoland specificaly - but double digit appreciation is not likley, IMHO.

25% per year IF banks allow 100 year amortization, or if our children's future income is included in loan qualifying, or if another invention generates trillions like the computer did. But for now, Get google earth and peruse the amount of bare land available .
In normal growth years, real property appreciates at the same rate that the dollar depreciates. Values will continue to plummet as population growth and job creation slows. (no buyers-no value)
If you are the only one bidding on this "green" house, who sets it's price, The seller or the cash holder ?