Home prices back to 2001 levels

With values close to what they were in 1989, after calculating inflation, should a home ever again be seen as an investment?

By Teresa at MSN Real Estate Jan 3, 2012 12:24PM

© Robert Llewellyn/CorbisNow that the holidays are over, it's time for us to dissipate the holiday glow generated by that little bit of positive housing market data at the end of 2011.

Sure, pending home sales are up, but consider this: Home prices are now at 2001 levels.


Taking into account inflation, prices not only are at 2001 levels but close to 1989 levels, says David Blitzer, chairman of the index committee at S&P Indices, analyzing the latest S&P/Case-Shiller data.


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"This shouldn’t suggest that home prices never rise faster than inflation any more than the arguments for investing in your home — they’re not making any more land or everyone has to live somewhere — should be ignored," Blitzer wrote at Housing Views. "Rather, the runup and the rundown in prices in the 2000s didn’t do much for average home values while they wreaked havoc on the economy."


The country is littered with the damage caused by the runup in home prices of the mid-2000s. Yes, some people who timed their buying and selling well ended up with a lot of money. But others, like many people who bought homes during those years, ended up losing their home and everything they had invested, or owing tens of thousands -- and in some cases hundreds of thousands -- more than their home is worth.


Blitzer's comments are a reminder that rising home values – unless we get high inflation – are unlikely to bail many of those people out.

Plus, we're also reminded that one lesson of the real-estate crisis is to think of your home as a place to live, not as a way to acquire wealth. University of Southern California economics professor Robert Bridges wrote earlier this year that $1 invested in a California home in 1980 would have yielded $2.98 in 2010, while $1 invested in the stock market would have yielded $11.49.


Still, Americans see homeownership as their best investment. Perhaps they are taking into account the intangibles, such as neighborhood ties and the right to paint the rooms any color you please. While your house may not be your best retirement savings option, owning a home gives you a cheaper place to live once you've paid off the mortgage.

Is buying a home a good idea? It depends. Writes Blitzer:

There isn’t a general answer to the question because it depends on the economy, the real-estate market and, most of all, on the needs, desires and finances of the potential buyer.

What do you think? Is buying a home a good investment?

Jan 3, 2012 2:19PM

  Numbers can be misleading. Article states $1 invested in California home in 1980 would have been worth $2.98 in 2010 but $1 instock market $11.49 but you have to actually put in each dollar in stock market where it's usually 10% or less down on a home.


  $100,000 dollars in 1980 with an average down payment of 10% would be 10,000 and would be worth maybe 600,000 today or close to a million in 2007. Turning an initial investment of 10k into as much as a million figuring with home mortgage deduction mortgage costs no more than rent is a pretty good deal.

Jan 3, 2012 2:18PM
I was fortunate to buy in a very stable, desirable, mature market and have seen no depreciation at all in my home's value.   No appreciation, but given what has happened to real estate, I figure that's quite good. That being said, I never looked at my house as an investment.  It's a place to live.  I'm probably in this house for the rest of my life, or until I can no longer maintain it.  Either way, the value when I sell it won't really be that important to me. I know not everyone has this option because they are relocated, grow their families or lose their jobs.  But if you but comfortably within your means, you'll have a better chance of being ok.

We bought our home and I wouldn't trade it for the world but if anything happends to my spouse I won't be able to get but maybe half the price out of it and I will not be able to keep it because it casts too much and it is also too large for me to live in. If anything would happen to him I would like to sell and move into a small apt. I would just lose everything.


Jan 3, 2012 2:04PM

Hmmm 2001 prices huh?  I'd  say we have a ways to go still. Like maybe 1980 prices!. Inflation and stagnent wages  have not kept up with realestate, and you damn well know it. I remember my parents built a  well constructed home on 1 1/2 acres with 15k  down for $40k. He was a truck driver making less than $20,000 a year. That was 1976... Today here I am (living like a popar btw),making 50k and wouldn't even consider buying a house with todays prices. The difference between me and the idiots that bought during the "Boom"? i can do math..Thumbs down

Jan 3, 2012 2:01PM
The market is the market. Buying homes has paid off well if you timed it right. Like stocks with out most of  the scammers. Invest in a home and not as an investment. I flipped and made a few bucks and in this market would not touch even a steal. Obama will  not and can't make a market anymore than it is. As things stand now, buy what makes you feel at home.
Jan 3, 2012 1:53PM

most of that depends on where you are planning to buy a home.  I wouldn't touch real estate in some areas but, believe it or not, some places were affected little to none.

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