Housing loses its investment allure

The housing market has not recovered, and may not ever return to its glory days.

By Kim Peterson Aug 23, 2010 2:26PM

Home financing © CorbisA new reality is setting in for homeowners: A house will not make you money.

We're in a vastly different world from what we saw over the last three decades, when real home prices increased every year -- sometimes by as much as 4%, The New York Times reports.

That kind of appreciation made housing seem like a smart investment. A nest egg that would make money. Now, and for the foreseeable future, you'll be lucky just to get back the money you put into your house.

"People shouldn’t look at a home as a way to make money because it won’t," one economic researcher told the Times.

Experts tell the Times that now the housing market will likely only keep up with inflation, instead of beating it. And long term, the market will probably never recover the trillions of dollars in value lost over the last few years.

That's a huge change from the way things used to be. Not so long ago, people would buy a home and expect it to balloon in value, clearing the way for them to cash out, snag a better home and climb the housing ladder.

 

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Now, mortgages are underwater and foreclosures abound. We're looking at possibly a 12-month supply of homes on the market, the Times reports. Home sales continue to spiral downward.

How do you recover from this? Some economists are more optimistic. "You have to live somewhere," one economist told the Times. "In three or four years, people will resume a normal course, and home values will continue to increase."

Still other experts said the recovery may begin in some parts of the country, while others -- such as Arizona -- don't have enough demand to recover for decades.

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