While some economists believe home prices won’t hit bottom until the second half of 2009 and possibly not until 2011 or 2012, most agree that when they do start to rise the gains will be modest compared to the run-up seen during the last 10 years, according to an article in the Wall Street Journal this week.

Wellesley College economics professor Karl Case, of S&P Case-Shiller home-price-index fame, said that over the long term home prices will likely "increase on average at an inflation-adjusted rate of 2.5 percent to 3 percent a year, about the same as per capita income."

Others such as Massachusetts Institute of Technology economics professor William Wheaton see home prices increasing at a rate "roughly one percentage point higher than inflation" in the long run, while Economy.com’s director of housing economics, Celia Chen, expects house prices to rise an average of approximately "4 percent a year over the next couple of decades."

While factors that determine whether real estate prices will rise over the long term — such as incomes, household size, birth rates and immigration — are difficult to predict, researchers expect the following metro areas to see the strongest prospects for growth over the long term: Washington, D.C.; Raleigh and Charlotte, N.C.; Atlanta; Dallas; Houston; Phoenix; Las Vegas; Albuquerque, N.M.; Boise, Idaho; Salt Lake City; Seattle; Portland, Ore.; Denver and Colorado Springs, Colo., and parts of Florida, Tennessee, Virginia and interior California.

William Frey, a demographer at the Brookings Institution, a Washington think tank, believes that upstate New York, western Pennsylvania, Michigan, Ohio, the Dakotas and Iowa are likely to see "low growth and falling populations" in the future.

***

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