NYT: Housing Fades as a Means to Build Wealth, Analysts Say

[TomClash]

Housing will eventually recover from its great swoon. But many real estate experts now believe that home ownership will never again yield rewards like those enjoyed in the second half of the 20th century, when houses not only provided shelter but also a plump nest egg.

The wealth generated by housing in those decades, particularly on the coasts, did more than assure the owners a comfortable retirement. It powered the economy, paying for the education of children and grandchildren, keeping the cruise ships and golf courses full and the restaurants humming.

More than likely, that era is gone for good.

“There is no iron law that real estate must appreciate,” said Stan Humphries, chief economist for the real estate site Zillow. “All those theories advanced during the boom about why housing is special — that more people are choosing to spend more on housing, that more people are moving to the coasts, that we were running out of usable land — didn’t hold up.”

Instead, Mr. Humphries and other economists say, housing values will only keep up with inflation. A home will return the money an owner puts in each month, but will not multiply the investment.


http://www.nytimes.com/2010/08/23/business/economy/23decline.html?hp


Houses were used by many as a retirement supplement. So much for that meager retirement nest egg for most of us. Combine this development with the imminent social security age increase and the motto is: "Work until you die, slave."

[CoffeeCat]

1. The walls are slowly closing in on...

...the lower 98 percent of Americans.

[BeyondGeography]

2. They're always the last to know

[edhopper]

3. In NYC

But New York housing is still ridiculously overpriced. And I'm talking about Queens and Brooklyn, not Manhattan.
When you look at prices now compared to pre-bubble prices in middle class neighborhoods, and rent to own or price to income ratios, prices are still very high. Here is one stat, in Queens the price per sq ft in 2001 was $65, it is now over $200.
I believe sales are down, but NYC has not yet experienced the collapse that many other places around the country have.
Rents on the other hand have gone down, but house prices have not followed.

[marmar]

4. There was much less bubble construction in NYC than in places like Las Vegas, Florida etc

[edhopper]

6. That's not true.

In New York they build upward. The amount of new Condo construction (many of which are now rentals) was as big as any of the other boom areas. And Condos in Queens and Brooklyn, especially if you include monthly maint. cost, are as high as single or two family homes.

[marmar]

7. Even so, I would bet it pales in comparison to the number of new houses built in places.....

..... like Las Vegas, Phoenix and the Inland Empire of SoCal over the bubble period.

[edhopper]

10. You'd be surprised

tens of thousands of new units and hundreds of large office buildings converted to condos.
Way overbuilt, lot's of empty buildings, many houses sitting on the market over a year, and yet not the crash we've seen other places.
And it should be pointed out that the crash happened in many place that did not have the building boom like those places you mentioned, in places like Ohio and Virginia.

[marmar]

11. Oh, I know that.....I was visiting my friends this summer.....

and was stunned by the brand new, just about empty condo buildings in Lower Manhattan and Brooklyn Hts.

[dixiegrrrrl]

5. "the imminent social security age increase "???????

What did I miss?
Some law got passed that I missed?

[TomClash]

8. Sorry maybe imminent was the wrong word

But you can bet the Catfood Commission will recommend it and it will be implemented for people not yet receiving SS.

[woo me with science]

9. I'm getting really sick of these

"things have changed for good--get used to being poor" articles.

[klook]

12. Don't let 'em fool you

As long as the mortgage interest tax deduction is in place, buying a house will remain a great financial move.

And once you get that sucker paid off (which http://fivecentnickel.com/2009/06/03/how-to-pay-off-your-mortgage-early/">everybody should try to do as soon as possible), you can live in it relatively cheaply.

Those who sold after their house value escalated dramatically a few years ago, and before the bubble burst, made out like bandits. But that's not the only scenario where buying a house makes sense.

[dixiegrrrrl]

14. ow many people can take that deduction?

We can't. We are both on Soc. Sec. and have no taxable income, but do pay monthly mortgage
( fortunately a low mortgage).
As more and more boomers retire, what happens to their plans to downsize into smaller homes?

How many currently employed can afford to buy a house now?
The supply of houses is reported to be at 12 months, or more, but the supply of decent jobs is decreasing every month.

doesn't matter how low the housing prices go, if your wages are going even lower.

[Recursion]

13. Thank God

Maybe I can afford to buy a house now, if that's the case.