The fallout of the housing bubble had one clear result: people will no longer blindly assume that housing will always be a good investment. Indeed, we now know it can be a terrible one. Many Americans, however, relied on their home as their central source of wealth due in part to the false promise of appreciation. Without being able to use their homes as an investment going forward, where will Americans turn? They must instead utilize the only other options available: stocks, bonds, small business, or savings accounts. This is a good change.
The New York Times has an article today, explaining how housing is fading as a strong option for investment:
Dean Baker, co-director of the Center for Economic and Policy Research, estimates that it will take 20 years to recoup the $6 trillion of housing wealth that has been lost since 2005. After adjusting for inflation, values will never catch up.
"People shouldn't look at a home as a way to make money because it won't," Mr. Baker said.
While this view is somewhat controversial, few believe that housing should normally appreciate the way it did during the real estate bubble. At best, it could slightly outperform inflation, though it might not. But it's not like Americans have no other place to put their money -- plenty of other investment options will be available in the future. Many of them would be an improvement over real estate for economic growth.