I work out of the Stark Middletonoffice, and I feel compelled to share this blog entry from Dave Stark, President of the Stark Company in the Greater Madison Wisconsin area. I sincerely wish his remarks would be picked up by the national media instead of so much of the negativity we see. Dave has presented a very realistic picture of the status quo. Of course this picture does vary from market to market.
Yes it hurts! A lot! If you bought when the market was at it's peak and now your home value has plummeted. But I tell my clients that we could not keep going and going in this direction at the rate of appreciation we had in the recent past, or no one could afford reasonable housing. As Dave puts it, most of what we "lost" was funny money, not really sustainable, but the fundamental value of housing is actually right about where it should be as we move forward.
From Dave's recent blog post on the company's website
It's Time to Change the Conversation About Real Estate
One of our alert agents sent me an article from the New York Times a few days ago, written by a gentleman named David Streitfeld. The headline was titled, "Housing Fades as a Means to Build Wealth, Analysts Say." Among the many choice quotes from the article were these: "...many real estate experts now believe that home ownership will never again yield rewards like those enjoyed in the second half of the 20th century, when houses not only provided shelter but also a plump nest egg." And this: "...Mr. Humphries and other economists say housing values will onlykeep up with inflation (my emphasis added). A home will return the money an owner puts in each month, but will not multiply the investment." And this: "'People shouldn't look at a home as a way to make money because it won't,'..."
I could go on with the quotes, but suffice it to say that the rest of the article continues to build the case that housing is no longer a good investment, that people who think it is are delusional, and that the future for real estate ownership is bleak.
Now, you're probably thinking that I'm about to tell you that all this is bunk, that these people are misinformed charlatans, and that real estate is really poised to rocket forward again with 5-10% appreciation and more.
Well, if that's what you think, you would be wrong. My complaint about this article is not with it's primary factual basis...I actually agree with the notion that real estate will likely only keep up with inflation going forward. What I disagree with, vehemently, is that that is a bad thing. Our problem in the real estate market is not that we haven't restarted the price appreciation of the 2000's. The problem is that we think there's something wrong if it doesn't, that prices need to get back to where they were five years ago, and that we are continually being told that real estate is no longer the cornerstone of most family's wealth. That's why I've titled this post "It's Time to Change the Conversation About Real Estate."
The problem real estate has right now is not with its fundamentals. The problem is that our perception of what those fundamentals ought to be has become badly warped in the last couple decades, and now that it's returning to a more normal and sustainable path, we're being told by "experts" that it's not good for us any more.
In subsequent posts, I'll lay out the case in more detail as to why real estate remains one of the most important investments any family can make. It's my belief that one of the primary problems our economy is having in getting restarted is the loss of faith the last 5 years have instilled in us about the value of our homes. Yes, in many parts of the country, housing has lost a lot of apparent value compared to what we thought it was just a couple years ago (not nearly as much here in South Central Wisconsin). But much of that apparent value was created by a credit bubble that had to pop, and now that it has, home values nationally are back close to on track with their long term historic path. In other words, most of what we "lost" the last few years was funny money, never really sustainable, and while some who bought during this period have been hurt, the fundamental value of housing is actually right about where it should be going forward. And yes, going forward, it's probably going to appreciate at about the rate of inflation. And that's a good thing. We'll start to show you why next week.
I will post his blog from next week, also.
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