Wednesday, December 19, 2007
Harvard Study points to growth
Just to keep things in check, a study commissioned by Harvard University shows that over the next 10 years the United States will need 19 million news homes to accomodate naturally occuring home attrition, the housing needs of immigration, and new buyers entering the market. All of this supports a strong future for builders and buyers, so despite the current credit crunch, time is on our side.
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That's right folks, Harvard just completed a study that concluded that the U.S. has a need for 19+ million more homes in the next 10 years. The Harvard Joint Center for Housing Studies forecasts that the average annual need for new homes will be 1.82 million units per year after on average for the next ten years. The study further cautioned that assuming the current market conditions are evidence of a long term market trend in the housing market. The beauty of the real estate market is that real estate has the benefit of being an investment as well as a roof over your head. I cannot think of another investment that has such multiple advantages. If you were talking to a stock broker about investing in the stock market for your retirement then you would most likely be told to ignor market gyrations and invest for the long term. As far as I know anyone who purchased real estate 4 years ago or longer is still way ahead on their investment and I believe if you buy now you will be very pleased with your purchse 3 years from now. In the mean time you pay a mortgage instead of rent and that is tax deductable and if you get a fixed rate mortgage (Please) then your rent will most likely not go up which is in itself a tremendous hedge against inflation. There have been a lot of studies that show that the stock market has outperformed the real estate market over the last 100 years but do those studies take into account al the money invested in stocks of companies in which the investors lost all their money? I point tjis out becasue I believe that if you pay cash for real estate it is nearly impossible to lose all your money since it is something that is of limited supply and over the long term of growing demand which is different than stocks which really are just pieces of paper and have no value if the company executives mess up or if the climate that lead to the stocks value should suddenly change. Even New Orleans real estate values have not gone to zero and that situation is one of only a handful where someone can lost all or most of thir investment in property. One other tip from stock brokers that investors are often given is too buy when there is blood in the streets. Well if there is ever a time in the real estate market when the market conditions fit that description it is now! But folks that is perceptual. In our market home prices are up 1.6% from last year even though the rate of sales is down. My prediction: Market conditions improve locally in early 2008 and get better throughout the contry as we get closer to the next election cycle. Why? The average person has the numbers that needed for any politician to gain office and everyone running for public office will want to make speeches about what they did to save the housing market or what they are planning on doing. Positive news will help buyer psychology and that is the biggest problem with the market at this time. every politician is about to start dealing with the consequences of hurting the value of the average persons most significant investment. Did the politicians do it? Not really, market conditions did it but you can bet that politicians will be promising a fix when there really wasn't a problem to begin with---just a large burp in what will ultimately be realized as a great bull market in real estate. More on the commercial investment market later. Michael Masters, real estate investor and broker
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