Shiller says housing prices won’t rebound for a generation. Are we headed for a society of permanent tenancy?
May 5, 2012 Leave a comment
In an interview with Reuters Yale economics professor Robert Shiller (creator of the Case/Schiller housing index) has expressed his concern that housing prices may not rebound for a generation. He says that the combination of high gas prices, a weak labor market, and a general sense of unease among consumers have all combined to keep housing prices low for the foreseeable future. He apparently added in the interview that he was worried that we would not see a housing rebound in our lifetimes.
If this is true could it mean that our generation is doomed to low housing prices? Will we really not see increases for the foreseeable future? What effect will that have on future home sales? Don’t people buy homes because they are a good investment and because they will increase in price in the future? Will they now stop? Won’t this radically affect our whole economy and what about all of the people who work in the real estate industry?
These are just a few of the questions I had when I read this. I hope this economist is wrong but if he is right then we could see a whole different society in the future. It could be one where people won’t invest in real estate anymore. People could merely rent their home or apartment and not buy because they have little hope of getting any appreciation or equity out of their investment. This could mean the end of the American dream of home ownership.
It is well-known that there are kids who are staying longer and longer at home. Much longer than they did in previous generations. These are the “failure to launch kids”. According to CBS fully 70% of children under 30 still live with their parents. These people will probably not buy homes until much later if at all unlike previous generations when people usually left home at 18 years old.
This factor combined with the recession, the foreclosure crisis, and the failure of housing appreciation is creating a different kind of nation. One where real estate is not purchased nearly as often. I believe that there could be a future for America where people don’t invest in real estate. One where they rent and don’t own ever. One where they are tenants for life. This will be a different society than the one we know now. Some realtors I know claim that the whole economy is so dependant on real estate that it cannot climb out of this recession until real estate does. (See here for my blog on how foreclosures are predicted to increase in the near future).
I hope the realtors are wrong and I hope Schiller is wrong. I personally don’t want to see our country abandon the American dream of homeownership and trade it or a society of permanent, lifetime tenants. It sounds too much like medieval Europe to me. I don’t foresee good coming out of us becoming tenant/peasants who have not hope of owning homes. I believe housing prices must rise again in the not too distant future if we are to avoid an unraveling of society and a return to a more slavish tenant existence. This would not be good for anyone and a departure from everything were moving towards up until this point in our history.
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