Charles Evans of the Chicago Fed called the cliff a "big uncertainty" while Atlanta Fed President De
http://www.marketwatch.com/story/why-us-house-prices-wont-recover-2012-05-01-1225310?reflink=MW_GoogleNews
The latest S&P/Case-Shiller numbers, reported last week, show that prices in 20 major markets declined 3.5% over the year through February. Theyre now back to 2002 levels. If we subtract for inflation, theyre back to 1998 levels.
But consider: After subtracting for inflation, prices are also back to 1986 levels. And 1955 levels. And 1895 levels.
Thats because the natural rate of price appreciation for houses is zero after inflation. Prices will eventually stop falling. Theyll resume rising. But over the long term, theyre unlikely to resume rising faster than inflation.
Thats why prospective buyers should stop focusing on the vague hope that house prices will jump from here and focus instead on the functional value houses provide for the money. In most markets, they provide enough of that to make buying a good deal.
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