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Robert Shiller is famous for his house pricing index that he developed with Karl Case.  Both are economists that have looked at housing values throughout history in the US.  He made an interesting point on a recent interview.  He stated that when you adjust for inflation the values of homes in 1990 were about the same as in 1890.  He also pointed out that people in general have an unrealistic expectation that their homes will continue to go up and up and up and somehow be the cash cow to save their financial future.  But this simply isn't true. 

Let's understand an appraisal principle.  Houses depreciate in value.  They are not made of materials that last forever.  On the contrary they wear out over time or loose their functionality because of changing markets (a four bedroom home with just one bath).   It is the land that actually can increase in value because it doesn't wear out.  I suppose it could erode.  But generally speaking it is the only thing in a real estate transaction that remains stable.

So if you are out there thinking that your homes is always going to go up in value, please realize that generally speaking when adjusted for inflation your value will most likely remain pretty stable in the long run. 

Hit the link below for the interview.  It's very interesting.

http://finance.yahoo.com/tech-ticker/article/53094/U.S.-House-Price-Decline-Could-Be-Worse-than-Great-Depression?tickers=%5Egspc,fre,fnm