By Kay Wilson-Bolton
September 12, 2006
Very few people have said that buying a home was a good short-term investment. In fact, it has been proven for decades that it is the best long-term investment.
That has been demonstrated by those who participated in “equity flight” in the last few years and took their huge equities to states where mansions could be purchased for comparatively small amounts of dollars.
Newspaper articles can be confusing if the writer does not have a regional perspective on the housing market and can temper it with an understanding the local market.
It’s important to read the whole article and not swallow the headline as absolute.
There are two factors to keep in mind when evaluating news reports on current market conditions. One is that you need to evaluate what’s happening now in relationship to what came before. We’ve recently experienced several of the best years for home sales on record.
If the market were to continue to escalate, we’d have a serious problem.
Even with the current adjustment, we still have affordability issues. If home prices were to continue to rise unchecked, first-time buyers would eventually be shut out of the market. With no entry-level buyers, the move-up market would grind to a halt. Rather than a curse, the slow-down in the housing market is a blessing and we have to agree to view it as such.
The other factor to keep in mind when you’re trying to make sense of changes in home prices is that, in most cases, the changes quoted in the press are changes in the median price of homes sold during a given period of time. The median is the market price for a given time period where half of the homes sold for more and half sold for less.
Changes in median price from one period to the next do not necessarily reflect changes in absolute home values. When the median price rises, it means that the number of more expensive homes sold during that period increased. Likewise, when the median price of homes sold declines, this means that the volume of lower priced homes sold increased relative to the number of more expensive properties.
Home ownership is the best way to plan for retirement. Delaying a purchase and continuing to rent helps the landlord pay off his or her mortgage and keeps the new buyer from enjoying the tax deduction for mortgage interest. Yes, the new buyer might have to curtail some entertainment activities and forego that vacation, but little beats home ownership.
Before drawing conclusions about the strength of the home sale market in your area, you need to collect data at your local level. Regional, statewide and national statistics can be misleading. A REALTOR® can help you and that’s what we do.
Kay Wilson-Bolton is the owner of CENTURY 21 Buena Vista and brings a regional perspective to local issues. She can be reached at 805.340.5025 or at www.readysetkay.com