"Superstar" cities will become even more unaffordable.
Over the next five years, the housing market will face major challenges as the mortgage market recovers from a credit crunch caused by irresponsible subprime lending.
But the slump won't last forever. After all, the major driver of the national housing boom was record-low interest rates. If rates stay low, Americans have jobs, and mortgages are available at reasonable terms, the housing market will stabilize.
And in 35 years? I think housing will reflect three key trends:
The aging population According to the Census Bureau, more than one-quarter of American adults will be over age 65 by 2040. Their plans, more than almost any other factor, will change the face of housing.
Some of the newly retired are now millionaires - not because they saved much money, but because they bought a house in the right place at the right time. So there will be huge growth in retirement communities in scarce and beautiful locations, such as the Gulf Coast, Florida, Arizona, and California, with rising prices to match.
Increasing differences between the haves and the have-nots The rich, and their houses, will likely continue to get richer. "Superstar" cities that have led the nation in house-price appreciation - cities like San Francisco, New York, Los Angeles, Boston - will become ever more attractive to the best educated and wealthiest Americans, with house prices rising to match.
In 35 years it will be tough to find any neighborhood in these cities that hasn't become gentrified. With a limited supply of new housing and great amenities, it is hard to envision the rich moving away from these superstar cities. You're not rich? Those places will be even less affordable for you than they are now.
Globalization We all hear that the world is getting flatter. Sooner or later, the housing market will have to do the same. That means rising house prices abroad - a mixed blessing for you.
On the plus side, you'll snap up vacation homes south of the border in Mexico, the Caribbean, and beyond, and watch them appreciate. You may well retire there.
But globalization also means that people around the world will be richer. So they'll start to compete with you to buy and live in the best locations all over the globe - including those superstar cities we just mentioned.
However, house prices in many cities in the U.S., such as Houston, Detroit, and St. Louis, will likely remain affordable.
