Forget location, location, location.
  The three most important things in real estate are duration, duration,
duration.
  If you bought a home in the last two years, it's very probably worth less
than you paid.

  But if you bought four years ago, you're probably still above water.
  And if you bought eight years ago, you're almost certainly sitting on a
tidy profit, assuming you haven't sucked every dollar of equity out of
your home with a second mortgage or refinance.
  Nationwide, home prices in February were nearly 15 percent higher than
they were in February 2004 and almost 75 percent higher than they were in
February 2000, according to a 20-city index tracked by Standard &
Poor's/Case-Shiller.
  OK, I'll admit that location is an important factor in real estate. The
point I'm trying to make is that housing, like the stock market, is a
long-term investment.
  All the whining, headlines and public debate over home prices focus on the
steep drop over the past year or two.
  To be sure, these numbers are chilling.
  In February, Case-Shiller's 20-city index was 12.7 percent lower than it
was the previous year and 14.9 percent below its July 2006 peak.
(Case-Shiller tracks resales of existing, single-family homes, not new
homes or condos. Its 20-city index covers about 45 percent of the nation's
housing market by value.)
  Prices, on a year-over-year basis, were down in all 20 cities except
Charlotte, N.C., which eked out a 1.5 percent gain.
  "This the first time in recent history that we've had a national decline
in housing prices," says Maureen Maitland, vice president of index
analysis for S&P. "In the past, you may have seen this kind of a decline
in a particular region, but another region would be going up."
  Another troubling sign: The rate of decline has accelerated in the past
few months, with some markets losing 3 or 4 percent in a single month,
Maitland says.
  What you have to keep in mind, however, is that the nationwide decline in
home prices was preceded by 10 years of appreciation.
  Let's not forget that in the second half of 2004, prices in Las Vegas were
soaring 50 percent on a year-over-year basis. Anyone who thought that
would go on forever spent too much time in the desert sun.
  The 20-city home price index is now roughly where it was in January 2005,
about 31/3 years ago.
  Some cities have backtracked even further, some not quite as far.
  Prices in the Bay Area and Los Angeles are about where they were in August
2004. Hard-hit Detroit has retreated to its August 1999 level.
   Seattle, on the other hand, is back where it was July 2006.
   Charlotte has lost just one month's worth of appreciation. Because it
never really boomed like some cities, Charlotte has so far avoided a bust,
Maitland says. Long-term look
  Compared with four years ago, home prices in most cities are still in
positive territory.
  Only three of the 20 metro areas tracked by Case-Shiller show losses since
February 2004: Detroit (down 11.8 percent), Cleveland (down 7.5 percent)
and Minneapolis (down 2.7 percent.)
  If you go back eight years - to February 2000 - only Detroit is below
water, with a 3 percent decline.
  The other 19 cities are showing gains ranging from 7 percent in Cleveland
to 118 percent in Miami. The Bay Area falls in the middle, with an
eight-year appreciation rate of 70 percent.
  Case-Shiller's Bay Area index is made up of Alameda, Contra Costa, Marin,
San Francisco and San Mateo counties.
  Median prices for all nine Bay Area counties from DataQuick show a similar
pattern. As of March, the median price for all existing single-family
homes was down 20 percent over the past year, but up 60 percent over eight
years.
  Even struggling Solano County, down 25 percent over the past year, is up
92 percent over the past eight. (For other counties, see chart.)
  As bad as things seem today, they could get worse before they get better.
While a national housing downturn is unusual, individual regions often
face protracted declines. Southern California suffering
  The Los Angeles area suffered year-over-year price drops every month from
November 1990 through September 1996, according to Case-Shiller.
  The Bay Area endured a similar downturn from November 1990 through May
1994, followed by a shorter slump from May 1995 through May 1996.
  Home prices, like stock prices, generally move in multiyear cycles. They
often become extremely overvalued or undervalued before they turn around.
  After the stock market crashed in March 2000, it took the S&P 500 index
more than seven years - until October 2007 - to top its previous all-time
high.
  That's why stocks and homes should always be viewed as long-term
investments.
  Lynn Reaser, an economist for Bank of America, says the housing market "is
likely to hit a low point probably this year. In terms of (new-home)
production and sales, we should see some bottoming in the fourth quarter.
But prices are likely to fall further in some of the overheated markets in
2009."
  The simple problem is that home prices outstripped incomes and home
construction outpaced new household formations. Until homes become more
affordable and the population grows enough to fill up some of those empty
houses, prices are likely to fall.
  One indicator Reaser is tracking is the inventory of unsold homes.
  At the current rate of sales, it would take about 9.5 months to absorb all
of the unsold existing single-family homes on the market, Reaser says.
Usually, it would take only 6.7 months.
  For new single-family homes, "the current inventory equals 11 months' of
supply versus a long-term average (since 1985) of 5.6 months," she says.
  How soon this excess inventory can be soaked up depends largely on the
economy and the availability of credit.
  Maitland points out that cities with weak job markets will have a harder
time turning their housing markets around.

  On the Web: To see how home prices have changed in 20 metro markets, go to
www.sfgate.com/webdb/ushomes/.
  Timing is everything
  An index of resale home prices in 20 U.S. cities is down sharply over the
past year (through February) and since its peak
  in July 2006. But it is still up over the past four and eight years.

PeriodChangeSince peak (July 2006)-14.8%Since February 2007-12.7Since
February 200414.9Since February 200074.6 Source: Standard
&Poor's/Case-Shiller

Putting Bay Area home prices in perspective
  Prices for existing single-family homes in the Bay Area are down in all
counties except San Francisco the past year. Prices are still up in most
counties the past four years and in all nine counties the past eight
years.

Reprinted From S.F. Chronicle