Real Estate Value is Price, Appreciation & Much More!

By
Services for Real Estate Pros with Weichert, Realtors
In his NY times article on 8/22/10 David Streitfeld quotes Stan Humphries, Chief economist for Zillow: “There is no iron law that real estate must appreciate. That housing values will only keep up with inflation. A home will return the money an owner puts into it each month, but will not multiply the investment.” My take away from his words is he is leading consumers to believe that real estate is not a strong investment. I take exception to painting housing appreciation with such a broad brush. There are multiple layers to the value of home ownership including a personal value which is subjective to individual homeowners. When you purchase real property you exchange money for it and have the use of it. Unlike the purchase of stock where you are exchanging money for a piece of paper which is a promise of a return. Housing appreciation was affected by a series of dominos that did not have to happen. The issues we are experiencing in the real estate market stem from some large, professional lending institutions who by-passed the common sense and ethical procedures that were in place to insure consumers did not get into a debt that they could not afford and with little or no skin in the game. These lenders used the American dream of home ownership to foster their own personal benefits. This over abundance of funding caused buyers to over-bid on homes they could not really afford. This was the trigger that caused prices to skyrocket. Adding to the drama were property owners who used their new found equity like an ATM machine. This abuse compounded many homeowners’ financial issues. These property owners found themselves more upside down than they would have been if they had not abused their own equity positions. They had complete control over this investment and many abused it – no one to blame but themselves. And finally the job market was the unexpected factor these new homeowners did not take into consideration - leaving no wiggle room or back-up plan in place should an emergency like this one come up. Now, the government stepped in, and is controlling not only lending practice but property pricing as well - with stricter appraisal guidlines added into the mix. I believe residential real estate is an investment that with careful planning and management will give a continual return on investment. Purchase residential real estate and you own a tangible asset. Diligent consumers who were careful in their selection of property and properly planned their financial strategy to own and manage it, are surviving the impact of today’s economic issues and will continue to see appreciation from their personal starting point. Unfortunately, these people are not making the top news stories. Residential housing not only provides shelter, a property owner has other benefits of home ownership over and above that. There are tax benefits to homeownership that a renter does not have. There are the benefits of being part of a community, setting down roots and creating memories. Property can be left to one’s heirs. It can show stability. And if a property owner keeps the property for a period of time and maintains it equity builds up. The return when sold is cash! And if things get tough financially, if you own property, you can always grow a vegetable garden and feed yourself and your family. You cannot do that with shares of stock!

Comments (2)

Jean Hanley
Coldwell Banker Kivett Teeters - Hemet, CA
Specializing in Folks Who Want To Buy/Sell Homes

Noelle, I am right there with you.  Real estate is and always will be the best investment for your dollar.  That's just my humble opinion, but I think a good one.

Aug 23, 2010 08:25 AM
Noelle Barbone
Weichert, Realtors - Media, PA

Jean, you are right!  I am trying to combat the negative press,  If consumers continue to listen to them, everyone will end up homeless - haha

Sep 05, 2010 02:28 AM