My wife and I are the property’s eighth owners in 85 years. We bought it in 2001 for $425,000. If we sold it now — a questionable proposition in this market, I think, seeing as how buyers are scarce and prices stalled — I’m not sure how we’d do. Housing economists often describe prices as sticky, since sellers typically take a long time to reduce their asking prices in periods of slack demand. A year ago I might have hoped we’d sell our house for 60 percent over what we paid; today I might say 50 percent. Next year, I wouldn’t be surprised if it’s closer to 45 percent. If that turned out to be the case, then it’s likely that the houses of the newest generation of homeowners — those, like me, who have never really known a down market — will have become unstuck at last. What’s worse, if home markets seem unstuck here, they may be even more so elsewhere. Driving along the highways outside Denver this summer, I passed one fallow farm field after another with its billboard summoning buyers to a Shangri-La that wasn’t yet built but would assuredly be “starting” in the low $200,000s. At the moment, it’s difficult to imagine these communities will start anytime soon. Will they ever?

Image Credit... The New Jersey Historical Society

Now that we’ve become accustomed to the idea that buying a house means buying into a market as well as a neighborhood, it’s unnerving to see things unwind. There aren’t many upsides to what’s happened over the past few months, with some lenders going bankrupt and many borrowers who assumed too much risk or debt facing a difficult future. Still, one of the more depressing aspects of the housing run-up was the widespread conflation of a house’s price and its value. If there is a possible benefit to the slump, it may be that we’ll emerge with a different understanding of the value of our homes, regarding them less as investments (perhaps burying the presumption, at least until the next boom, that they’re as reliable as stocks and bonds) and more as something all too ordinary. That is, as places to live.

I say this in part because I tend to believe that houses are immensely valuable for their intangible benefits (a sense of place, community and stability), while being much more complex investments than we acknowledge. When we calculate appreciation, for instance, we almost always discount the steady and substantial costs of upkeep and improvements, especially on older houses. We assume large income tax benefits, even when they are eroded by property taxes. We forget that inflation matters (the $425,000 we paid for our house, for example, would be about $500,000 today). Finally, we overlook the historical data, which suggest that trends in housing prices have been mostly unremarkable over the 20th century. Robert Shiller, the Yale economist, who has been one of the most astute longtime observers of the housing market, concluded in 2005 that during the past hundred years, prices have mostly been flat or declined, with just a few exceptions. These were after World War II (when the Mentzes enjoyed a substantial gain on their home), in the late 1990s (when the Hymans enjoyed a similar increase) and in the past five years (when my wife and I enjoyed the boom).

There’s no perfect way to explain these jumps. As most of us know by now, property-value appreciation reflects everything from demand sparked by regional wage growth and low interest rates to supply costs determined by raw materials and the availability of land. Psychological elements — the urgency and risk-taking that characterize speculative markets — can be a crucial factor in pushing up prices, too. What further complicates things is that houses have no underlying revenue stream (such as a stock’s corporate earnings) on which to base an assumption of true value. So there’s no precise way to work out how, say, exotic mortgages and lax credit standards distort the market.

Thus, during the recent boom the best indicator of value became “what houses are selling for” — another variation, in other words, on the greater-fool theory, which holds that commodities are worth only as much as someone else will pay for them and that someone (a greater fool) will always be willing to pay more than the last buyer. To anyone who shopped for a home in a booming metropolitan area over the past few years, though, this was also the defining conundrum of the era: an apartment or house couldn’t possibly be worth the stratospheric asking price — but then again, maybe it could. Wouldn’t that have to be true if six bidders were considering buying it?