Gary Watts, a renowed real estate industry economist, recently spoke about the real state of the real estate market, especially as it relates to the Sacramento region. I thought I would share with you the good news he has for people considering real estate investments. For more information about Mr. Watts, visit his website at www.impactre.com.
Real estate markets are always cyclical, and effective real estate investments are held for the long term. Regardless of what the media headlines scream about the terrible shape of the housing market, the astute investor will look beyond the headlines and discover that today’s market offers opportunities that may not be available again in the near future.
Hardly a day goes by that headlines don’t trumpet the implosion of the subprime lending market, the lackluster sales of homes in the area or the radical increase of foreclosures. Newspapers sell more papers with negative headlines. While the headlines may be factual, lets explore why they are usually not accurate. A little historical perspective is in order.
In 1969, Business Week said in an article about the housing market, “The goal of owning a home seems to be getting beyond the reach of more and more Americans. The typical new house today costs about $28,000.” And, in 1977, National Business stated, “The median price of a home today is approaching $50,000…housing experts predict price rises in the future won’t be that great.” A decade later, by 1980, home prices in California had risen an average of 11.5% per year. While the headlines may have been factual, history shows they were not accurate.
In the early 1980s, inflation was running about 21.5% and 30 year fixed rate home loans ranged from 16% to 18%. In 1985, Money Magazine wrote, “The golden-age of risk free run-ups in home prices is gone.”At the end of the decade, California home prices had risen by an average of 7.95% annually. While the headlines may have been factual, history shows they were not accurate.
From 1990 to 1996 California home prices declined less than 2% annually, for a total of 12%. The San Francisco Examiner in 1996 wrote, “A home is where the bad investment is.” While the headlines may have been factual, history shows they were not accurate. From 1998-1999, Sacramento area home prices increased 38%! According to the California Association of REALTORSâ, the average annual rate of appreciation for California homes since 1968 is 7.75%.
- California’s economy is large and diversified. We are home to many of the most creative and innovative companies in the world—think Google, Apple, HP and many, many more. California is home to 1 out of every 11 workers and produces 15% of the Gross Domestic Product in the United States.
- Northern California is home to over 30% of California’s entire diversified workforce: trade, a growing service sector, expanding electronics, manufacturing, high-tech, bio-tech, construction, tourism, agriculture and government, are among the many industries employing our workforce.
Currently, home prices have dropped a bit, interest rates are at historical lows, and the large number of homes on the market allows for more choice than any time in the recent past. Now is the time to consider purchasing real estate. Whether your first home, a second home or part of a long term investment strategy, Sacramento area real estate will be a strong cornerstone for your financial future. Don’t look back in several years and say, “I wish I had taken advantage of the opportunity.”
-Kathy Fox
(reprinted from The Sacramento Union with permission)
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