REAL ESTATE IS STILL THE BEST INVESTMENT

Real Estate Continues to be THE Best Long-Term Investment



Real estate is the single best investment one can make. That's how I open my weekly radio show, "Income Property Investment Talk," on the Voice America Network every Wednesday at 11 a.m. (yes, a shameless plug). That is the overriding message builders should be articulating, with repetition, to key internal and external audiences. And, yes, the facts prove this proclamation accurate.

"Homeownership as a long-term investment has a track record that is virtually unmatched by any other purchase in terms of its real benefits, Brian Catalde, president of the National Association of Home Builders (NAHB) and a homebuilder from El Segundo (CA). "Homeowners today have a combined $11 trillion in equity in their homes, against which they can borrow to help pay for college tuition, medical expenses and other needs. And housing offers important tax incentives to make owning a home more affordable."

"When you consider the facts, it's easy to see why 5.5 million people are choosing to buy a home this year. There are some challenges in the market, but overall there are many more opportunities in local markets today," said Pat V. Combs, 2007 President of the National Association of REALTORS. "Real estate continues to be a solid long-term investment."

While the latest S&P/Case-Shiller home price statistics for 20 of the nation's largest metro markets showed a 4.4 percent year-over-year decline, a closer examination of the data reveals that on average, these same markets appreciated in value by more than 50 percent over the past five years. For example, in Chicago, home prices declined 1.3 percent between August 2006 and August 2007, while posting a 34.2 percent gain for the five-year period between August 2002 and August 2007.

"To argue that home values will continue to decline and never recover, somebody has to make a convincing case that it will cost less to build a new home five years from now than it does today -- and that's just not going to happen," said Catalde. "Despite today's housing slowdown, the cost of land, labor and materials required to build new homes continues to go up."

Furthermore, Catalde noted that the rapid appreciation rates in 2003-2005 were clearly unsustainable over the long-term, and that housing typically increases in value slightly above the overall inflation rate.

Among the 20 markets surveyed by S&P/Case-Shiller, which represent more than 40 percent of the U.S. population, four posted home price appreciation rates of more than 80 percent over the past five years while 11 registered gains of more than 45 percent.

"It's important to keep things in perspective," said Catalde. "The current housing price correction is most pronounced in the once super-heated markets in California, Nevada, Florida and Arizona. In most other markets, price declines have been pretty modest."

"Perceptions about real estate have been skewed in recent months due to the overwhelming focus on national figures. While average sales and prices help us identify trends, the fact is all real estate is local -- conditions vary greatly from one city to the next," added Combs. "Unfortunately, that news is largely unreported."

Builders cannot allow the national media to report what it deems to be the proper perspective on the value of real estate. Builders must get out in full force and spread, with repetition, one simple message: "Real estate is the single best investment one can make."


Written by Peter L. Mosca
November 12, 2007