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January 29, 2007
Have housing prices really changed?
Housing prices have made the headlines a lot in recent years, first by going up and then by softening and falling, at least in some markets. But N.C. State University economist Mike Walden says home prices aren’t as volatile as some people think.
“There are two factors here: One is when you are comparing the price of anything -- a house, a car, a CD -- over time, you have to strip out inflation, because inflation is going to push all prices up,” says Dr. Walden, a North Carolina Cooperative Extension specialist.
“Secondly with houses you have to worry about changing characteristics. The new homes that are built today are bigger, with more amenities, than new homes built 10 or 20 years ago.
“So when you do all this, when you adjust for those two factors, actually what you see is no increase at all in new home prices between 1980 and 2000,” Walden explains. “You do see some slight upward movement during economic growth periods, some softness during recession, but over the entire 20-year period, no change.
“Now in the last six years we have seen, on average, house prices go up,” he adds. “However, if you compare where they are today and adjust for those two factors I mentioned, compared to 1980 they are still only 10 percent higher.”
Posted by deeshore at January 29, 2007 12:16 PM