Sell Now or Wait?
We all know that prices are down since the summer of 2006 highs, but where are they going from here? While we can only make educated guesses, the best way to project the future, is to study the past. When Wall St. looks for real estate information, it turns to Case Shiller. Here is a chart that Case Shiller provides of home prices adjusted for inflation going back to 1890. You can see that prices tend to stay mostly aound 110, which shows that home prices stay fairly constant after adjusting for inflation.
The 2 big exceptions are in the 30s, during the Great Depression, and between 2000 and 2006. During the Depression, demand was destroyed and prices plunged. From 2000-2006, everyone qualified for a home and demand soared and so did prices. Over time, prices seem to revert back to the 110 line.
Based on this chart, Case Shiller has been predicting the next move in prices is down another 20-25%. Though nobody can know the future, when you add in the huge shadow inventory of foreclosures and short sales, their logic seems very sound to me.
My conclusion is that one should not sell just because of this chart but, if this is the right time to sell, waiting will probably have little value.
