American housing prices avoid European immobility

In his new book Safe as Houses?, Neil Monnery indicates that housing has historically served as a fairly stable receptacle for savings – a hedge against inflationThe price changes over time in consumer goods and services, quantified in the consumer price index (CPI)., but not necessarily a means of increasing wealth. Housing prices generally increase at a regular rate of 1% per year according to Monnery, less than the rate of consumer inflationThe price changes over time in consumer goods and services, quantified in the consumer price index (CPI).. The explosive price increase that U.S. homeowners grew accustomed to after 1980 and especially during the 2000s housing bubble was an abnormality, not the rule.

This abnormality was not common to the entire globe. In Germany and Switzerland, housing prices remained flat or decreased (in both nations, about 60% of the demand for housing went to rentals). In Japan, real estate prices declined for two decades after the Japanese financial crisisAn economic downturn resulting from the failure of banking and government agencies to regulate and adjust to developing market conditions. of 1990, much as U.S prices did after 2006, eliminating price gains made between 1970 and 1990.