You make some good points. I did a little exercise where I calculated the
the necessary adjustment to the sales value of a home to keep the monthly
mortgage payment the same if mortgage rates went from 6% to 9%, or in the
case of an ARM, from 4% to 7%, and the house value would have to drop 25%.

We just sold our home for a price we absolutely could not refuse because of
location. We are renting now but I think I will wait awhile.

"Greem" <greem[at]nospam.com> wrote in message news:3F746821.4FAC[at]nospam.com...
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Nashville Pete wrote:
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I've seen it covered, but I can't say it's gotten a huge amount of
press. I guess your opinion on volume probably depends on what papers
you've read.

There was an article in either the NY Times or WS Journal (sorry, I
don't have a specific reference) which argued that when you look at
prices over the past 2-3 decades, there were only a limited number of
markets where home values rose far above the value of other investments.

The suggestion was that prices in NYC, Boston, LA, San Francisco, DC,
etc. were showing bubble-like tendencies, especially for high-end
properties, but in a lot of other markets -- small towns, medium sized
cities, rust belt, etc. -- housing prices over the long run pretty
closely reflected the increase in stock prices.

You'd see some wider variations over shorter periods of time, of course.
Home prices within the city of Detroit were stagnant for years, and
recently have shown some reasonably big % increases in some
neighborhoods. The overall trend over time in a lot of markets like
Detroit, though, averages out to a fairly conservative growth.

I think the basic point is that looking at prices over a shorter period
tends to increase the risk and volatility in real estate as an
investment. It's certainly possible that a house you bought last year
might drop 10-20% in value by next year, and might not show a real
return on investment for another 5 years or more.

That doesn't mean you shouldn't buy a house, since there are other
factors involved, such as the opportunity cost of renting, but it does
suggest that a house shouldn't be considered an investment which can be
counted on for an automatic return in the next few years.