Is Today’s Housing Market The Equivalent of a “Lost” Decade?

Some analysts are saying that housing has hit rock bottom and that brighter times for home prices are on the horizon. A Reuters article this week, however, includes analysis stating that the down market might be something Americans should just starting getting used to.

In what Reuters calls a “lost decade,” the U.S. could be in need of a reality check regarding what it calls the “busted conveyor belt” that is the U.S. housing market. Reuters reports

“What some of Wall Street’s forecasts for a recovery may be underestimating are tectonic shifts in the U.S. economy that make the housing market a different place from a decade ago.

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Record levels of student debt, 15 years of flat incomes and the fact that nearly half of homeowners are effectively stranded in their houses look likely to weigh on prices into the indefinite future.

Several housing experts have said the market is in danger of drifting for years. In a bleaker scenario, the fragile U.S. economic recovery could slip back into recession if Europe’s crisis deepens or the political impasse in Washington triggers a new budget crisis, putting the housing market at risk again.

“We’ve gone through half of a lost decade since the crisis started in 2007,” said Robert Shiller, co-founder of the Case-Shiller U.S. housing price index and an economics professor at Yale University.

The so-called Lost Decade in Japan occurred after the speculative bubble in the 1980s, when abnormally low interest rates fueled soaring property values. The ensuing crash has continued to afflict the Japanese economy ever since.

“It seems to me that a plausible forecast is, given our inability to do stimulus now, for Japan-like slow growth for the next five years in the economy. Therefore, if there is an increase in home prices, it’s modest,” said Shiller.

A Reuters poll published on Friday showed most economists think the U.S. housing market has now bottomed and prices should rise nearly 2 percent in 2013 after a flat 2012….”

Read more to find out what the analysts had to say

Written by Elizabeth Ecker

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