NEW YORK (
) -- Many U.S. homeowners waiting for their house to be worth what they could have sold it for in 2007 or 2008 could be waiting 20 years, according to forecasters.
"We have a very long road to go," says Mike Cosgrove, principal at Econoclast, an economic research firm based in Dallas. "It's not like the equity market where you get a rebound and pretty much recover in a couple of years from a crash. In the housing market, without really high inflation numbers, we're talking about a decade, maybe a decade and a half or two decades before someone who bought around the peak ever recovers."
Despite the name of his firm, Cosgrove is not a huge outlier in his profession. He is forecasting average real GDP growth of 2.5% over the next five years and inflation of about 3%--roughly in line with what many other economists are predicting.
If Cosgrove's belief that a return to the peaks could take 20 years sounds radical to you, it may be simply that your definition of "recovery," is very different from that of most economists.
Many homeowners may think of a recovery in terms of when they will be able to sell their house for what they could have gotten three years ago, but economists typically define a recovery as stabilization in housing prices--in other words--they aren't going down any more.
Real estate research and consulting firm Maximus Advisors has three separate definitions of a recovery, and is always very careful to define its terms, according to economist and founder Peter Muoio.
"Two people could be having a vicious argument over timing and they both could be right depending on what they're actually referring to," he says.
None of Muoio's definitions, however, answers the question that many American homeowners are likely contemplating, which is when their houses will fetch what they could have gotten three or four years ago.
For the hardest-hit U.S. housing markets, such as California's Inland Empire, such an event is simply too far out to predict, according to Muoio.
"Depending on the market you're in, you may not see that in any sort of time horizon that any of us can forecast because there are certain markets where there's quite simply a bubble and that bubble is not going to be replicated in any kind of even long-term horizon," he says.
Some markets, however are a different story. Washington D.C. and coastal California look to snap back pretty quickly, and New York's housing market has so far been on a solid trajectory toward recovery due to strong bank profits, according to Richard Greene, director of the USC Lusk Center for Real Estate.
For markets such as Florida, Las Vegas and California's Inland Empire, "maybe 20 years is right," Greene says.
While this news may be depressing to many homeowners, it isn't necessarily a bad thing for the economy, says Christopher Thornberg, founding principal of Beacon Economics. "We have this weird dichotomist view of housing. If you think about oil prices: if they go up, that's bad. You think about clothing prices: if they go up, that's bad. Energy prices: if they go up, that's bad. But somehow if the cost of housing goes up, that's good? It doesn't make any sense," he says.
Thornberg adds that while there have been periods of time where housing has boosted consumer spending, the that boost was artificial. "Keep in mind that housing doesn't go up very much in value over the long run, so an equity-fueled spending surge is inevitability going to be followed by a lack-of-equity-spending drop," he explains. "It's not the kind of boost to the economy you want."
Written by Dan Freed in New York
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