The median cost of an American home, now $220,000, is expected to drop this year for the first time since tracking began in 1950, reports the New York Times. The decline will be modest—1 to 2%—but could last into 2008 and 2009, meaning that, adjusting for inflation, homes aren't likely to return to their 2007 value for more than a decade.
The decline isn't expected to be steep enough to erase the increases of the last decade, but it does give the lie to the long-held belief that a national housing bust would never happen. Especially affected will be Americans who are overextended on their mortgages or have borrowed against their home equity. One think-tank director said there are many who bought “homes at hugely inflated prices who are going to take a hit.”