The Long View
Excerpts from National Association of Realtors economist,
Lawrence Yun

“How much have real estate investors lost due to the housing market bust?”  Well, exactly how much real pain are we talking about? Let’s look at a couple of examples. An investor who bought a property in Las Vegas five years ago would be ahead by $150,000; up $200,000 in
Miami. The average investor nationwide – up $54,000. Only the recent buyers (flippers) who bought last year in few specific markets would have encountered a loss.
Not All Losses Are Created Equal
I’m not discounting the discomfort of those who lost big, especially lenders and hedge funds who had large exposures. But nearly all real estate investors who have a reasonable holding period are doing quite fine. Some of these fortunate buyers who got into the market several years ago will still consider a modest give back as a loss without considering the large gains reaped during the housing boom. That’s the nature of the human mind.
A Home is Not a Stock Certificate
Consumers and homeowners who are in real estate for the long-term are once again coming out well ahead.
Because of the power of leveraging, $10,000 used for a down payment on a typically priced home in the
United States at a typical appreciation rate of 5 percent will return $110,000 after 10 years. The same $10,000 invested in the stock market appreciating 10 percent annually will result in $23,600. A typical homeowner had $184,400 in net worth versus only $4,000 for a typical renter.
The Spooky Thing
The lack of buyer confidence to enter the market has been the one principal reason in holding back home sales. Many would-be buyers are spooked of a possible home price decline. And the media is fueling that fear.
Opportunities to Seize
It’s also important to point out that times of crisis often turn out to have been times of opportunity in hindsight. With over four million net new job additions in the past two years– the time frame during which home sales have steadily fallen – a significant pent-up demand has developed. Home sales and home prices will be higher in 2008 compared to 2007. And, as with any investment, look longer term. Those investing in a home and keeping it for a typical holding period of six to ten years will likely see their investment pay off; those homes will have been a good investment.  

Susan B. Garcia

Prudential Carolina Real Estate

843-886-8110

sgarcia@prucar.com

www.SusanGarciaRealEstate.com

The thoughts on this website do not necessarily reflect those of Carolina One Real Estate.
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