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U.S. CITIES:
The Future of Home-Price Appreciation
Luke Mullins
After its historic decline brought the global economy to its knees, the U.S. housing market is gearing up for a long-awaited recovery. Real estate experts expect home prices to hit bottom in late 2010 or early 2011 before -- finally! -- heading north again. But what shape will the rebound take? Are we in for another boom? Or will we have to settle for sluggish growth? Here's the outlook for home price appreciation through 2020.
[See 10 Cities For Real Estate Steals.]
The trajectory of real estate values will vary a great deal from one market to the next. But home prices at the national level should appreciate at "pre-bubble" rates once the market re-establishes its equilibrium, says
Modest increases in home prices will be supported by larger paychecks, says
The "echo boomers." Meanwhile, demographic forces should boost demand for housing over the next decade, according to
A more restricted flow of credit should prevent another housing bubble from forming anytime soon, says former Fed governor
Still, housing bubbles haven't been driven to extinction. That's because the real estate market is cyclical. Regional housing markets have gone from boom to bust for as long as people have had mortgages. And because the booms generate so much wealth for homeowners, investors, and influential industries -- like home builders -- it's unlikely that
So what's the best way to play an asset that will appreciate 1 or 2 percentage points above inflation during periods of stability but can swing wildly in times of imbalance? Simple: Buy a house because you'd enjoy living in it, not because you expect blowout returns. Then you'll never be disappointed by its quarterly statements.
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The Future of Home-Price Appreciation | Luke Mullins
(c) 2010 U.S. News & World Report