According to the S&P/Case-Shiller US National House Price Index, there isn’t much good news in the housing market. But they do make an interesting observation: “During this cycle, Boston was the first metro 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 reported in May , -3.9% versus -4.3% reported in May. Boston has shown improvement since the beginning of the year, where its -5.5% annual growth rate turned negative before other metro areas, it is truly the first metro area in Giro de lap.”
It should be noted that home prices in Boston have appreciated in recent months. The -3.7% YTD is declining due to the positive figures seen in the April/May report of 0.8% and the June/July report of 0.2%.
What’s most important for those of us in the Northwest is to pay attention to the city that puts out the best numbers year after year: Seattle. With home prices up 7.9% in the great Seattle market, investors would be wise to understand why that market is not negative. There are a number of reasons. First, the entire state of Washington has been overlooked in the recent ‘boom town’ investment sprees. Las Vegas, Miami, Phoenix, anywhere in CA and elsewhere have seen massive investment and exodus of real estate investors over the last decade. There were many, many loans that I personally undertook on properties in many of those locations and it was not uncommon to see a refinance into an 80% 80/20 blend loan that was 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 cash out or greatly reduce the cost and still not have any of their own money in the property.
Investing in real estate is no longer a 6-12 month payday. 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 on the market for 6 months, you can’t afford to lose.
Every market 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% over the last 7 years. Is it any wonder that these markets are cutting 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 seen in markets that are now in decline. 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’s nothing wrong with the real estate market that won’t be fixed in a year or two. 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 and mortgage rates at a low, Seattle mortgage interest rates are right where a homebuyer wants them.
