It is hard to imagine a time in U.S. history when housing was actually perceived as cheap for an entire generation. Yet this is the exact experience that occurred from 1915 to 1945. Home values were cheap in relative inflation adjusted terms. Even after 1945, homes were still affordable and this is where the seeds of viewing housing as a great investment took hold. But housing was a good investment for all the reasons it is not today. Housing was a store of value, not an ATM machine for funding your next boat. Yet the current credit bubble bursting is exposing the underlying problems with using a home as the primary function of wealth in this country. A home doesn’t offer anything more than shelter and certainly doesn’t create new and innovative employment sectors. Yet for an entire decade housing was seen as the elixir to solve every problem in our economy. Today, nationwide housing values are inflated by approximately 30 percent even after the current correction. This is hard to believe for many but all we need to do is look at data from 1968 and adjust it for inflation.
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