Reply #27: It's possible that housing-prices will fall

[necso]

to a level that reflects some different metric of inflation than the government's. That is, if the government has been underreporting inflation, then housing prices might "bottom-out-and-plateau" at rather higher levels than this chart might seem to indicate.

Moreover, housing-price increases have not been uniformly distributed and looking at the overall picture may be distorting. For example, some geographical-areas have climbed relatively little over this time-period, and therefore may have a smaller distance to fall -- while others may have reached heights that border a deep precipice.

Personally, my feeling is that speculation (deliberate and unintentional speculation -- especially induced unintentional speculation: ie, many folks may have essentially gotten conned into buying or refinancing) has played a rather larger role in housing-price increases than commonly appreciated, and this speculation may lead to greater volatility -- including considerable "floor"-overrun (that is, on the way down, prices may overshoot the "sustainable floor", because of the panic typical of major speculator sell-offs, and stay there for some time).

For those of us who have no such "investments", this could prove interesting.

Of course, any major drop in housing-prices promises difficulty for the economy, and with the refinancing and nontraditional-loans done in recent years, many people could be put in a situation where their houses are worth less than is owed. And with the new bankruptcy law in effect, many of these people who end-up losing their homes may (effectively) never escape the debt that they have incurred -- incurred while filling the coffers of those speculators who have pulled out in time (or who pull-out in time).

And again, geography will probably play an important role, with different areas keeping different amounts of their "increased market value".