I’ve been looking for some time to find someone out there who is willing to face the fact that housing actually works in cycles. Every guest on the cable news programs reminds us that the market can’t and won’t go down. It upsets me that there are rarely guests brought on to share the other side of things. I finally found an article that shares some good statistics about past market declines.
the average house price in L.A. dropped from $222,200 in 1990 to $176,300 in 1996, a loss of 20.7 percent. . . . Furthermore, those are nominal prices, not real values. To calculate the loss more realistically you would have to figure in the cost of inflation: $222,200 in 1990 would have been worth $266,700 in 1996 dollars, which means the actual loss for homeowners buying in 1990 and selling in 1996 was closer to 34 percent.
The article goes on to talk about other cities and metro-areas . . .
In Oklahoma City prices plummeted 26 percent from 1983 to 1988. It took 15 years for prices there to return to nominal 1983 levels.
Houston home prices fell 22 percent from $111,000 to $86,800, and also took 15 years to rebound.
Counting inflation, the average Houston home, which cost just $159,700 in 2004, is actually worth less now than it was 22 years ago. When, adjusted for inflation, a home cost about $219,000 in 1983. In Oklahoma City, the inflation-adjusted price in 1983 was $196,600. Today, it’s just $135,100.
You can find a good chart with percentage losses and recovery times for quite a few US cities on the article. Take a look.