We saw what was probably the biggest real estate bubble in American history just recently, when housing prices topped out somewhere in 2006 or 2007.
We then saw a major bust, the beginning of which actually preceded a bust of the entire economy.
Of course, we have to remember that real estate is a local issue. A few parts of the country didn’t see a housing boom, and some parts, such as New York City, didn’t really see a bust. In general, however, we saw a big boom followed by a big bust.
After housing prices bottomed somewhere around 2011, we have seen them climb quite significantly, though still not to the levels we saw in 2006 in most places.
Different Points of View
There are differing points of view on where real estate is headed, even by advocates of the free market.
Some people think we are in another bubble that will pop again. They point to the fact that the housing market is being propped up by low interest rates, a loose monetary policy by the Fed, and bank bailouts.
While these things are certainly true and they do prop up real estate prices, what’s to say it can’t go on for a while longer?
Other people think that real estate prices will continue to go up and maybe even enter a new bubble at some point, while maintaining that it is not a bubble yet. They correctly point to Federal Reserve inflation.
When there is high inflation, investors look for hard assets. You can’t get more of a hard asset than real estate. So if you expect inflation to continue to get worse, real estate is something to seriously consider.