My DC housing predictions for the new decade

Unless the Feds succeed in sparking a new bubble, I suspect the long-term housing trend inside the beltway will be stagnant nominal home prices and slowly declining real home prices. In fact, according to Zillow.com that's basically what's been happening over the past five years (except that there was no inflation in 2009).

These graphs show nominal prices per square foot:



I predict that a decade from now, DC and Arlington nominal home prices will be roughly the same as today, perhaps with slight declines. Real prices, however, will have declined significantly.

I'm no Nostradamus, so my prediction could easily be wrong, but my prediction is based on two key factors. First, DC and Arlington home prices are still substantially overpriced compared to their historic norms (relative to rents, incomes, inflation, etc.). Second, the usual tendency during a housing slowdown is for nominal home prices to stagnate, rather than to fall. This housing downturn has certainly been unusual, but inside the beltway home prices have been following the usual pattern since the peak.

I also predict that a decade from now Bubble Meter won't be around to be held accountable for faulty predictions. :-)