Here is an article that seems to explain the current housing market in the US.
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In the early 1980’s we saw a 15% drop from the peak prices of the late 1970’s. In 1984 the housing market began a significant boom cycle once again and by 1989 prices had risen to just above the 1970’s peak. Since 1979 we’ve had two 10 year long cycles where prices have risen significantly, then lost approximately 15 to 20%. This tendency to increase then fall back has kept the housing market more or less constant over the past 100 years, in terms of real value.
However, since 1997 prices for real property have been on a steady increase. This means that we have sustained the longest single cycle of price appreciation in American history over the last 10 years.
And true to the historical data it would appear that yet another 10 year cycle is coming to an end.
Indeed it is already apparent that prices have dropped approximately 10 to 15% in general since the beginning of 2006.
What makes our current 10 year cycle unique is that it is the only 10 year cycle that has sustained consistent price increases for the entire 10 years. In other words this is the first time in our history that prices for housing have increased steadily for 10 straight years without any kind of decline in the middle of the cycle.
I believe that when you look at this information and combine it with other essential data such as the increase in the foreclosure rates, growing consumer debt, the popularity of exotic mortgages, and most particularly interest only payments and the recent phenomenon of negative amortization, common sense would tend to dictate that this is a recipe for a serious and long term market adjustment.
Many factors seem to be combining at present, and may eventually bring about one of the largest market corrections ever seen in the real estate industry in the United States. We’ve already seen a 10 - 20% correction, but that is only 20% percent relative to 2005 values. If we look at the historical corrections that have already occurred at different points in time over the last 110 years, we might make some reasonable “guesstimates” as to what could happen in the near future.
Let’s put a couple of things in perspective. The real estate boom of the last 10 years exceeds any previous peak by 70 percent. The historical peaks of the past saw approximately 15 to 20% price growth followed by a decline of about 15 to 20% which kept the market somewhat consistent from the period 1948 to 1995. But the 1997 through 2005 boom has exceeded historical averages by approximately 300%.
Translated into plain English this basically means that we should see a major correction in housing prices over the next year, two or three, depending on interest rates, and overall supply versus demand.
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The number one thing it means is that just over the horizon are some of the best buying opportunities
we’ve seen in years. While a 50% drop in housing prices may sound like the end of the world on the surface, the fact is that this would be a tremendous boon for Real Estate investors who have patiently waited for better prices to come along.
Source: http://ezinearticles.com/?Biggest-Housing-Slump-In-US-History---Are-You-Prepared-To-Profit?&id=664698
