The first is history. After the last big run-up in house prices, in the 1980s, a long slump followed. In the New York area, prices peaked in early 1989 and then fell 9 percent over the next three years, according to government data. (Adjusted for inflation, the drop was much bigger.) Not until 1998 did prices pass their earlier peak.
Keep in mind that the 2000-5 boom was even bigger than the ’80s boom and that house prices on the coasts, according to the official numbers at least, have fallen only slightly so far. So it is hard to imagine that prices will rise 5 percent a year, or another 28 percent in all, over the next five years.
The second reason for skepticism is that buying has never been quite as beneficial as Realtors — and mortgage brokers, home builders and everybody else who makes money off home purchases — have made it out to be. Buyers have to pay property taxes on top of their mortgage, while renters have the taxes included in their monthly rent bill. Buyers also face thousands of dollars in closing costs (and, in Manhattan, co-op charges). Renters, meanwhile, can invest what they would have spent on closing costs and a down payment in the stock market, which hasn’t exactly delivered a bad return over the last 20 years.
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