USA TODAY Column: ….Housing has historically been a terrible bet for people who think it will return more than inflation. To show you what I mean, I have to tell you about my visit to Yale economist Robert Shiller’s office a year ago.
“Well, I think you have to reflect on the fact that it’s done it before. Home prices declined for the first half of the 20th century [adjusted for inflation]. Economists discussed that back then. Why are they going down? The conclusion was … of course home prices go down. There’s technical progress. They are a manufactured good. Back in 1900, homes were handmade, you know, craftsmen. But now, in 1950, we can get all kinds of power tools and prefab. And [construction workers] were just better in 1950 than we were in 1900. So of course prices will go down.”
Shiller also mentions that certain homes go out of style over time, dragging down prices. “What kind of houses will they be building in 20 years?” he wonders aloud. “They may have lots of new amenities. They will be computerized or something in some way that we can’t anticipate now. So people won’t want these old homes.” … (more)
EDITOR: Shiller may be correct, but we believe that well located housing is a good long term investment. Real estate is a repository of commodities, energy and labor, all of which have gone up in cost. But as Conrad Hilton famously said about the three most important factors in hotel success, “Location, location and location.”
