Friday, September 05, 2008

Bad news on housing

Robert Shiller of Yale goes around spreading good cheer.

What I found really interesting was this bit:

"People think that there is a strong historical uptrend [in home prices]. In fact, there is not. If you correct for inflation home prices in 1990 where the same as in 1890. That reflects the fundamental fact that housing is a manufactured good. It depreciates, by the way. And even if it doesn't depreciate, they can make more of them."

1990 was the peak of the Stockmarket bubble in the US. A house is where you live, why would you treat it as if it were a truly liquid investment?

HT: Mahalanobis

1 comment:

usha ramachandran said...

What about the land on which your house stands Rajeev?We cant make very much more of it and for a long time ahead more and more people are going to need homes to live--untill our population starts to go down ;-) like in some parts of Japan I hear!I think in India at least it makes sense to own your own home(and in other parts of the globe too --- rest is theory:-).