Creating Wealth Through Real Estate

The real estate market continues to be a hot topic of discussion at holiday parties and continues to be written about frequently in the media. During the boom years ending in July 2005, housing equity rose by $4 trillion. This gain was tremendous, but was even more "remarkable when compared to stock market wealth accumulation, which was essentially flat over the same comparable period."

The market has softened since its peak in 2005 but does this mean that we can expect a market crash. Well... maybe not! The fundamentals of the state (MA) remain strong and more importantly this is not the early to mid 1990s or the early 1980's or the mid 1970's when prices dropped because of recession and high unemployment.

"A recent detailed study of 379 US metropolitan markets by a well-regarded Pennsylvania consulting firm, Moody's Economy.com, says that while home prices are falling nationally, the worst may be over for Boston area homeowners. Prices may not rise any time soon, the study said, but they are probably NOT going to fall much further." However, Predictions are always tricky!

As long as households keep on spending, the economy should be able to withstand the blow from the housing correction.

Key Points and Outlook:

• Buyers on the Move Again: This is the best time in recent years to be a buyer. Pent-up buyer demand seems to be loosening, as the market appears to be stabilizing, and more are making lifestyle purchases and taking advantage of lower prices and better inventory before the spring market is in place. Even the Globe has been announcing the bottom of the market for the past 2 months.
• A Wide Variety of Homes to choose from: Inventory is still healthy, but beginning to drop as buyers are no longer waiting to time the market.
• Mortgage Rates remain Low: Mortgage rates are still historically low, inventory is healthy, and most sellers are setting reasonable prices based on this market rather than the unusual spiking prices of the past five years.
• Market at or near Bottom: Real estate market is experiencing a healthy price correction and return to a “normal” long-term appreciation rate. The New England Economic Partnership, a nonprofit research firm, is forecasting that home prices in Massachusetts will decline about 5 percent through the year.
• Still a Great Investment: Real estate continues to be a great long-term investment. Prices are expected to appreciate an average of 15-17% between 2007 and 2015.
• Location Location Location is still the Rule: This means that some towns will experience higher appreciation rates while others a bit lower.
• Rents are Rising: As for the rental market, industry watchers are expecting to see rents inch up. Continued job growth in Massachusetts and nationally, as well as low inflation, should bode well for apartment demand.
• Come Spring and More competition for Good Properties: 2007 is expected to mirror 2006, resulting in another historically strong year, although below the market sales and price spikes of recent years (according to National Association of REALTORS®).

To learn more about the real estate market and related investment opportunities join the discussion on this topic at the Holiday Inn, Brookline, on Thursday, April 26th. See NetSAP-Boston's website for more details.