Home Prices Tumble

Quote of the day:
“I am a writer. That’s it. No adjectives. The first thing is writing. Christianity is secondary.”
--Madeleine L’Engle, who died at age 88 on September 6.

The big, front-page headline in today’s “San Diego Union-Tribune” is “Home Prices Tumble.” It is the most e-mailed news story from today’s paper.

172,358 San Diego County households read this headline. In 171,231 of those households, at least one person said: “They’ll go up again in a few years.”

There is one perfect word to use in response to that. “Maybe.”

I’d say it’s 50-50. Maybe home prices will go up again in a few years, maybe they’ll stay the same or go down. How can anyone know?

And that’s why I bring this up. Home prices “going up again in a few years” seems to have attained the status of some sort of absolute truth. Perhaps it’s wishful thinking.

I sure hope no one is basing major life decisions on this. Why? Because no one knows. It’s in no way the sure thing so many people seem to think it is.

It’s not a “given” that prices behave this way. No matter how many people say it. No matter how many real estate agents say it. No matter how many economists who want to be celebrities say it.

Not only is it not a sure thing, it really is a tossup. Here’s a clue. Read real-estate news from one year ago and two years ago. What was being said then?

If you look at real-estate prices since the 1920s, there is no consistent trend that suggests that prices recover “in a few years” after a decline. The longest-term trend since the 1920s shows an average appreciation of 6% a year.

Maybe prices will go up again in a few years. Maybe they won’t. I sure don’t know. Over 15 to 20 years, I’d say your odds are pretty good, though also not certain.