As Boston advances, so does the nation?
According to the US S & P / Case-Shiller National Home Price Index, there isn’t much good news in the housing market. But they make an interesting observation: “During this cycle, Boston was the first metropolitan area to report negative year-over-year returns, in April 2006. In June 2007, Boston showed an improvement in its annual rate of decline in value in May, -3.9% from -4.3% in May. Boston has shown an improvement since the beginning of the year, where its annual growth rate was -5.5%. However, more data is needed to determine if Boston, whose growth rate turned negative earlier than other metropolitan areas, is truly the first metropolitan area to turn around. “
It should be noted that Boston home prices have appreciated in recent months. The -3.7% year to date is declining due to the positive numbers seen in the April / May report of .8% and the June / July report of .2%
What’s most important to those of us in the Northwest is paying attention to the city that records the best numbers year-over-year: Seattle. With a 7.9% improvement in home prices in the great Seattle market, investors would do well to understand why that market is not negative. There are a number of reasons. First, the entire state of Washington has been bypassed in recent waves of “boomtown” investment. Las Vegas, Miami, Phoenix, anywhere in CA, and elsewhere have seen massive investment and exodus of real estate investors over the past decade. There were many, many loans that I personally took out on properties in many of those places and it was not uncommon to see a refinance on an 80% loan that the combined 80/20 program used to purchase the property a year earlier. The property had appreciated so much (mainly based on other speculative buyers) in just one year that the investor could withdraw cash or greatly reduce the cost and still not have their own money in the property.
Investing in real estate is no longer a 6-12 month payday attached. As with any investment, whether in stocks or real estate, a balanced, long-term plan should be part of the strategy. If you can only afford to stay in the market for 6 months, you cannot afford to lose.
Each of the markets in the S & P / Case-Shiller US National Home Price Index report shows a gain since January 2000, including Detroit. Los Angeles is up 162%, Miami is up 164%, Las Vegas is up 121%, Phoenix is up 112%, San Diego is up 131% in the last 7 years. Is it any wonder these markets are slashing profits a bit to compete with other, more affordable markets?
And those markets that are still experiencing appreciation (Atlanta, Charlotte, Dallas, and Seattle) have not experienced the boom-and-bust levels of appreciation as seen in now-declining markets. Slow and steady wins the race, or at least that adage has been used in the past. Do yourself a favor and get rich slowly. There is nothing wrong with the housing market that a year or two won’t fix. If you want to be a real estate investor, now is the time to buy and HOLD.
With the supply of homes on the market at a high point and mortgage rates at a low point, Seattle’s mortgage interest rates are right where a home buyer wants them.