You have heard many times in the media that real estate is tabooed and it's a bad investment. Despite these comments that only enhance ratings and make a good story. We are here to make sure you all know that real estate is still a great investment and home ownership is is still the American Dream. What we have learned over the past few years and most of us already know: Home ownership is not for everyone. However, more than 60% of Americans own their home and the National Association of Realtors verifies that the average homeowner net worth is 40 times that of renters.
I will try and frame some data about the future that is based on real evidence instead of myths and stories. I will start with a historical veiw of home prices. The Census Bureau has recently reported that the median value of homes adjusted for inflation has quadrupled in the last 60 years from 1940 to 2000. Here are some numbers to prove it:
Adjust for inflation:
- 1940: $30,600
- 2000: $119,6000
Not adjusted for inflation:
- 1940: $2,938
- 2000: $119,600
You should know that though home values have dropped significantly in the second half of the last ten years, this drop happened after a very aggressive increase during the first half of this most recent decade. So, prices are much higher today than they were in the year 2000.
Now the questions that we all want answers too: Will enough people purchase homes in the future in order to support the price of housing??? Here are some important factors that we must address first to see why the purchase of real estate has slowed:
- Household formulation is at less of a rate. Slower population growth and families have been doubling up over the past few years. Less couples are having babies and children are living much longer with their parents. Even divorces are being delayed because of the slow economy.
- To many homes on the Market: With a "shadow inventory" of right around 3 Million to 8 million homes being held by banks waiting for the foreclosure process to come to term. There is a huge over-supply of homes in the market today. This has provided many with a great buying opportunity.
These are real situations that may take years to evolve to a better place. But, know one buys a home for the short-term and expects to make lot's of money. There is a strategy to do so. But, most of us do not buy a home to "flip" just to make money overnight. We buy a home to live in it for the long term... So, homes may not appreciate over the next year or two. But, over the next five or ten years I would bet otherwise. Here we have provided some evidence to support this idea.
- Population Growth: Even after experiencing one of the worst recessions since the Great Depression. The Census Bureau reports that the population of America grew almost 10% in the past decade. That's an increase of over 26 Million people if you can believe that. The bureau has also provided information that by the middle of this Century the population may reach 430 million...That is an additional 130 million people, which was almost the size of our whole country in the 1940's. Will all this growth cause the need for 40% more homes??? Probably not, as much of this growth will be come from immigration and they usually do not tend to purchase homes, at least for a few years after arriving.
- Household Formulation: The growth rates today are expected to be slower because of the economy. To give you and example The State of the Nations's Housing by Harvard's Joint Center of Housing Studies has forcasted that growth will reach 12-14 million over the next decade.
Now the economy will be only a temporary factor. As growth picks up, birth rates and immigration will increase and more children will leave their parents homes. Even the homes that are being foreclosed upon, will need homes to live in eventually. This all means that lower home ownership rates may not reflect into lower housing demand.
Now, last but not least the most important factor of them all. The true benefit of owning a home which is the security and sense of establishment along with a place to call home. If you make your payments. Then no one can tell you to leave. In other words, home ownership is not all about the investment of money. It's about the emotion of owning your own home in the place you want to live.
Now get out there and buy your Dream Home today. Opportunity awaits those that are ready.
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