Alpha Omega

Property Values Set to Fall 43% from Current Depressed Levels

Comparing the current period to previous periods in US housing is inherently futile. Housing consistently underperformed as an asset well into the 1980s in most areas. There were numerous and complex reasons for this. One of the chief reasons was a rubber stamp for building permits in most areas. Cheap land and lax environmental restrictions also played a big role. These factors no longer exist in most major cities, especially on the coasts. Add to this the progressive concentration of high-paying jobs in and around attractive big cities and you have the formula for a deviation in the housing market from prior norms. This is all fairly obvious, and undermines any attempt to sell a reversion to mean argument overall. In areas without a substantial base of high-earners chasing a limited number of desirable properties the reversion could well occur. However, most major urban areas are not overpriced when compared to similar areas internationally, and given the fact that choice land is mostly built out and new construction very expensive and highly regulated, one would not expect huge future declines in areas with diversified economies. Of course, if the macro situation deteriorates and a true depression were to ensue, any declines you care to imagine would be possible.