Yesterday's New York Times had a column by Bob Shiller that was titled "Rising Home Prices Blur Crystal Balls". He began by stating that we are well into, and maybe at the end of, the third biggest run up in home prices in a century. The first was the post WWII boom, the second was from 1997 through 2006, and this is the latest. The basic point was that, despite some indications that the boom is or has ended, it's hard to tell these days just what is going on. I say "amen" to that!
One of the most predictable characteristics of the past ten years or so is that very little is predictable. The market will be strong when you think it won't be, then weak when you least expect it. Even the seasons are shifting, so that weather isn't a strong indicator, and school years don't matter as much as before.
Although many points in the article apply to us locally, we haven't experienced the strong activity and soaring prices here in Connecticut. One of the most difficult questions to try to answer is whether we will still go down when other places do, since we never went up the way they did. It seems likeliest that we will, since monetary policy, tariff issues, student debt, and demographics are national in scope, so, if they drive the market down, Connecticut should fall also. On the other hand, our prices are not at the historic highs of other areas, so perhaps we won't see that effect.
I felt so much better that everything is uncertain, and that it's not just our company and our market. The problem remains, though, that we don't know how to predict even next year. Will mortgage rates drive the market? Will there be a cooling-off period for housing? To me, his most interesting speculation was that people may just be conditioned--regardless of reality--to thinking that 5% per year appreciation will go on forever, and that that will continue, because of the "housing is the American dream" effect. That seems likely to me, but how it will play out in the near term is, as Professor Shiller says, blurry in the crystal ball.
