article on the future of home prices

The Wall Street Journal published this article today about the future of home prices.  The article in interesting in that it surveys various housing economists for their opinion on the future of housing prices.  Many long-standing themes are highlighted.  Here are some notes:

*Over the next 10 to 20 years, housing economists expect prices will rise again — but, on average, probably not nearly as much as they’ve averaged over the past decade. (most economists predicted average appraciation rates to be 2.5%-4% or 1% above inflation)

*Some experts say it’s a bad idea to count on your home rising in value at all. People should think of their own homes mainly as places to live, not as investments, advises Kenneth Rosen, chairman of the Fisher Center for Real Estate at the University of California, Berkeley.

*In the long term, house prices are driven by fundamentals that are hard to predict: immigration, birth rates, the size and nature of households, and incomes. The trick is to figure out where job and income growth will be strongest and where immigrants and others will want to live. (BTW, Rosen notes that Portland, OR would be a relatively viable housing market because of the “urban vitality” the city offers)

*…applying demographic trends to house-price forecasts can be hazardous. Economists N. Gregory Mankiw and David Weil predicted in a paper in 1989 that demographic trends would lead to a “substantial” fall in real, or inflation-adjusted, home prices over the next two decades “if the historical relation between housing demand and housing prices continues.”