A few years ago, investing in real estate, became housing’s version of winning the lottery. Homeowners that purchased their property in the late 1990’s and early 2000’s saw 10% to 15% appreciation each year until 2006. Those were staggering numbers that had no chance of continuing. You often hear people who purchased their home 20 or more years ago, say the house they lived in was the best investment they ever made. Given what we went through with the recent housing crisis, that might be hard to believe.
For those families that have owned their home for a couple of decades have claimed that homeownership was the best investment, comes from the power of compound interest. This evolution can only happen over time. Using the stock market for comparison purposes, mutual funds should be held long-term, but often are treated like a hot potato and not held long enough for any positive gain. That same philosophy works for real estate.
Housing remains volatile. Even though home prices have stabilized in some areas, there’s still a chance that the home you buy today, might fall in value tomorrow. In today’s unstable times, only purchase a home for the long-term benefits or at least be willing to make a seven-year commitment. The old adage, “The fear of loss is stronger than desire to gain” should be relevant in the new age housing market.
U.S. home prices were down by approximately 35% from their pre-recession peak in 2006. In modern economic history, we’ve never had a five-year period where home values have fallen as long or as far as they have now. One reason your best investment could be a home is the relative upside of getting in on an asset class while it’s on the bottom versus buying into other asset classes that might be near the top. With home sales starting to improve and prices now forming a bottom, a home could well be the investment that represents the best low-risk buying opportunity out there today.
Mortgage rates are at historic lows and housing prices have taken a beating, but there is good news on the horizon. A survey of eighteen economist said they see prices bottoming in 2012, with 12 of those expecting it will happen in the first half of the year. Just one economist each said a bottom won’t happen until 2013 and 2014, while four others said it has already happened. At that point, housing should return to its old ways, with prices governed not by national temperament swings and global crisis but by more localized issues such as job growth. Please visit my website at www.JohnnyBrooksHomes.com for helpful tips on buying or selling a home, scan my other informative blogs and easy access to view local area homes for sale in Davis,California and the surrounding communities.