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Keeping the faith in real estate

Posted by Scott Van Voorhis December 8, 2008 09:00 AM

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The tougher times gets, the more optimistic some people seem to be getting about the real estate market.

I recently wrote about a Zillow.com survey that found 61 percent of homeowners believe the value of their castles had either remained level or risen over the past six months.

Hey, itís not my house thatís the stinker, itís my neighborís.

Yet thereís a difference between such unfounded and even deluded confidence and well-grounded optimism in the long-term value of real estate.

And thereís new evidence out there that despite the worst real estate market since the dreaded 1930s, most people have not lost their fundamental belief that a home is a good long-term investment.

A recent Wall Street Journal article points to two additional surveys. One, by Realogy Corp. found 91 percent of those surveyed thought buying a home was the best long-term investment option. Meanwhile, in an on-line poll by Citigroup, just 32 percent said it was a good time to invest in stocks, but 51 percent believed it was the right time to buy a home.

The Journal interviews some of the nationís top real estate experts, including our very own Karl Case, the Wellesley College economist whose name is on the prestigious S&P Case-Shiller home-price indexes.

The consensus is that real estate still is a good, long-term investment, though you are not likely to get rich. And by long-term, I donít mean a few years, but rather decades.
Most experts like Case donít see the market bottoming out until late 2009 at the earliest, and maybe not until 2012, the Journal reports. Even after the low point is reached, the market may skid along near the bottom for years more.

But experts like Case and William Wheaton, an economist and real estate expert at MIT, still hold a bullish, long-term view of the value of real estate. Case predicts home prices will rise, over the next few decades, at 2.5 percent to 3.5 percent a year, roughly in line with per capita income. Wheaton predicts home prices will also grow modestly, about a percentage point a year ahead of inflation.

That kind of optimism is not misplaced, but rather based on timeless fundamentals too many forgot about during the late real estate gold rush.

Still worried about the market? Just wait a decade or two.

This blog is not written or edited by Boston.com or the Boston Globe.
The author is solely responsible for the content.

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About boston real estate now
Scott Van Voorhis is a freelance writer who specializes in real estate and business issues.

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