Housing prices in the United States are falling nationwide; but in the minds of most house buyers, it is still a bull market. They have lived with rising prices for so long they now take it for granted that that is just the way things work. “House prices always go up in the long run,” they believe. But the run they are thinking of is only about 10 years long. Before that, prices rose – but only about as much as inflation. In some areas, of course, real prices rose with population and economic growth. In others, real prices fell. Overall, for the last century, there was little overall improvement in housing prices.

And why should there be? Housing is not an investment. It is a durable consumer good – one that needs maintenance, and one on which you have to pay property taxes. If it were a stock, it would be one with a negative dividend…you’d have to pay the company each year for the privilege of owning it. You can make money developing property. You can make money investing in property. You can make money building houses, too. But you can’t expect to make money buying houses.