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Home prices of the future

Real estate brief

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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'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." Whi...