Key Factors Now: Job Losses, Historical Precedent

When it comes to predicting housing prices, I’m officially agnostic: in the short run, I have no idea what they’re going to do (and neither does anyone else).

In the long run, I’m on record forecasting that they’ll be higher: historically, at least, that’s been a very safe bet (sort of the housing equivalent of JP Morgan’s prediction about the stock market: ‘it will fluctuate’).

However, now that housing prices nationally have dropped about 30% from the peak, housing bears have been deprived of perhaps their biggest “gun”: the argument that housing prices are still above historical trendline — sometimes way above.

In fact, depending on the city, housing prices have reverted to levels prevailing in 2003, 2000 — or even earlier (take a look at Detroit or Cleveland).

So, what arguments do housing bears cite now when they predict future housing market deterioration? Two things:

1) Recession-driven job losses; and 2) historical precedent suggesting that housing markets rebound slowly — typically, much more slowly than the stock market, for example.

The first argument seems fair; the second, more in the spirit of “prediction by extrapolation.”

After all, very few prognosticators called the current market accurately by looking in the rear-view mirror.

About the author

Ross Kaplan has 19+ years experience selling real estate all over the Twin Cities. He is also a 12-time consecutive "Super Real Estate Agent," as determined by Mpls. - St. Paul Magazine and Twin Cities Business Magazine. Prior to becoming a Realtor, Ross was an attorney (corporate law), CPA, and entrepreneur. He holds an economics degree from Stanford.

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