Houses lack earning power of post-World War II era
There have been booms and busts along the way, but from the second half of the last century through the start of this one, little derailed the real estate locomotive on its uphill climb. Now, however, the worst housing crash since the Great Depression may mean that a home purchase ought to be considered with the same warning issued to investors in securities: Past performance is not indicative of future results.
The economic fundamentals that drove home values up in the 20th century -- sustained growth in incomes, population and household wealth -- have been sputtering for years. Though the future isn't necessarily bleak, economists say there is little reason Americans should continue to see a home purchase as a path to wealth.
"We can no longer assume that housing will be as good an investment for the future as it has been," said Robert Reich, public policy professor at the University of California- Berkeley and U.S. labor secretary in the Clinton administration.
"We can expect a gradual rise [in home values], but not the bonanza we've become accustomed to between the end of World War II and 2006, and especially the last 20 years."