Tuesday, March 29, 2011

Why house prices will keep falling: Fortune

Some analyst are now pushing housing as an inflation hedge.  Arguing as inflation increases, then housing as commodity will increase.  This article states due to the bubble, there is still correction coming and this still maybe not be the time to buy.
So while house prices have dropped by a third from their bubbly highs in 2006, that only closed part of the gap (see chart, right) between house prices and inflation that opened up during the bubble years. Assuming the Federal Reserve isn't able to inflate another housing bubble, house prices have much further to fall.
"Despite the 33% drop in the Case-Shiller home price index from the peak, the cumulative gap since 1987 between baseline inflation and home price inflation is still 25%," Oppenheimer analyst Chris Kotowski wrote in a note to clients this month. "Thus, we believe home prices will still trend flat to down for a number of years."
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