Shiller has
charted American home prices from 1890 to 1990 and found that when adjusted for
inflation, prices didn’t actually go up at all over the entire 100 years. Add
in the cost of maintaining a home and the fact that buyers tend to prefer new
properties to older homes and Shiller says in the long run housing makes a
pretty lousy investment.
But while the
last 100 years have seen house prices stay virtually flat in real terms,
Shiller predicts the next century will probably be characterized by more
frequent real estate bubbles. People in cities that have seen major real estate
booms tend to be more likely to believe that house prices will eventually go up
again, he says. So rather than make buyers more cautious, the global housing
crash might be driving even more unrealistic optimism. “There’s been a rise in
a speculative culture all over the world,” Shiller says. “I think the
volatility of real estate may be going up in a long secular path. I don’t believe
home prices will go up, but they might be more vulnerable to bubbles.”
If so,
homebuyers who think global real estate markets have learned from past mistakes
will be in for a rude awakening.
I completely agree with Mr. Shiller. For as long as people
continue to view real estate as an investment, bubbles will continue to happen
at more frequent rate. Greed, low interest rates and accumulated debt would be
the fuel for those bubbles. Wealthy investors seeking a safe haven will play
a secondary role at best.
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