Remember back in 1999 and 2000, when surveys showed that—even with the Dow Jones and the Nasdaq indices in nosebleed territory—many investors still believed that the market would rise at least 10% a year as far as the eye could see? Back then, earning 10% on stocks was seen as a birthright.
Even with the torrid runup in housing prices, seems that Americans believe that same to be true in housing. According to a survey of wealthier Americans released today by PNC Financial Services Group, 65% of those surveyed said they expect to see double-digit increases in the value of their primary homes over the next five years, with 31% expecting an increase of 20% or more.
—Only 7% of wealthy Americans expect any decline in the value of their primary homes over the next five years.
—Break it down by region, and Floridians (who have seen a dramatic appreciation in their home value) are the most bullish. Interestingly, New Yorkers and New Englanders are the most bearish, with Californians close to the median. (More survey findings available at the link above.)
What do I think? I think there’s a parallel to what happened in stocks. Not predicting a nationwide 30% downturn, but perhaps a 10% to 20% downturn in overheated markets, followed by a long stretch—perhaps a decade or more—of flat returns. I think there’s a good chance that come 2015, Americans will be so conditioned to earning NOTHING on their home that the days when housing was viewed as an “investment” will seem quaint.
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.