No one knows what will happen, but it’s not hard to argue that the U.S. housing market is nearing a bottom. Home construction is as unsustainably low today as it was unsustainably high during the bubble. The more builders like KB Homes (NYSE: KBH ) and Lennar (NYSE: LEN ) are beaten into submission, the bigger the housing rebound will eventually become.
That’s the good news. But here’s a question few are asking: After the housing market does bottom, what should you expect from it going forward?
Motley Fool’s Morgan Housel asked Yale economist Robert Shiller — of S&P/Case-Shiller housing index fame — that question in an exclusive interview earlier this month. His answer might shock you: Not only do home prices, on average, not produce real returns over time, but history shows they could actually decline over the long haul. Have a look at the video: Robber Shiller on why home prices could fall for decades.
Right at the end of the video Shiller says house prices could be flat in real terms for the next three decades. This all seems rather strange to me. After all if home prices continuously increased in real terms we’d soon get to the point where no-one could afford a home.