Buying a home is a good investment
Investment options: real estate vs. stock market
As stock prices decline your home investment is there to cushion the fall.
With the downturn in stock prices over the last several years and the up and downs in the economy, people are realizing that their homes are often among the best investments they will ever make. According to the National Association of Realtors about three-quarters of homeowners currently have more wealth in home equity than in the stock market.
The NAR reported a 5.5% jump in the national median sale price of homes from 2001 to 2003 to $146,600. In comparison, the Standard & Poor’s 500 stock index fell about 13%. Though NAR economist Lawrence Yun says it’s unusual for home values to continue to rise during a recession, this is the second year in a row that homes have appreciated faster than S&P’s measure of stock performance. In fact, home values surpassed all the measures of stock market performance—not just the S&P 500.
Metro Oklahoma City home sales (from January 1, 2004 to November3, 2004)
- Metro Oklahoma City properties sold:
- Average sales price: $126,173
- Average days on the market: 72
- Alice Dahlgren sales:
- Average sales price for propeties listed and sold by Alice Dahlgren: $250,986
- Average days on market: 68
- Average sales price for all properties sold by Alice Dahlgren: $340,975
- Average days on market: 54
Factors driving the increase in values of residential real estate over the next decade
- Record low interest rates are attractive.
- A recovering economy helps boost both interest and the ability to afford a home.
- It is anticipated that the most significant factor driving home sales over the next decade will be the shift in demographics.
More about the demographics driving the shift
The 86 million "Baby Boomers", ages 45-65, are in the prime homeownership group. As they head into retirement, many will want to purchase a 2nd home. Also, the 88 milliion individuals in Generation Y, currently ages 2-25, will grow up and enter the home buying market. And additionally, immigration has played a significant factor driving the housing market, and it will continue to do so. According to Doug Duncan, Morgtage Bankers Association, Washington, D.C., 11 million new immigrants came to the United States in the last decade. This trend will continue.
What to expect regarding home values
L. Yun of the National Realtors Association, predicts housing prices will rise 4.9% accross the country in 2005. Few regions in the country are expected to see a decline in home prices as our economy continues to grow and employment increases. Many hot regions such as San Diego County have experienced 20% annual gains in home values for each of the last two years. This trend of escalating prices is expected to continue, but not at such a blistering pace.
Yun also notes that rising interest rates are not an immediate threat to lower home prices: "Generally, a 1% increase in mortgage rates means households need to reduce their potential home purchase price range by 10% to get the same monthly mortgage payment." He also noted that according to historic data, only when rates rise "in excess of two percentage points and if rates reach 9 percent or higher" do home sales measurably decline. All this is good news for homeowners who can expect the value of their home to increase without having much immediate negative impact if they decide to sell.
According to Alice Dahlgren, "The residential real estate market in Greater Oklahoma City continues at a strong pace. The area is the fastest growing economically in the state and as new jobs are created, demand for housing remains strong. It is a sellers market."
