The wsj link is here:
The yale publication is by Prof Shiller--(i misspelt the name, sorry) and is titled Long-Term Perspectives on the Current Boom in Home Prices by Robert J Shiller
I can't attach it here but I think it can be got by a web search--there are repositories you can transfer the file from.
A summary of this paper is here:
The best thing about this thread: Realtorsâ„¢ don't even know what the Case-Shiller Home Price Index is. Priceless.
Jerry â€“ During the 13-year period from 1987 until 1999, real home prices stayed roughly within the range of $125,000 to $150,000 â€“ national average. Thatâ€™s a long time to go outside of your fantasy 6.8% rate of return. Why buy into that kind of market when I could park my equity into a high yielding CD or municipal bond? Sure, your response will counter with â€œlong term means 30 yearsâ€ or whatever. But, whatâ€™s your opportunity cost for those 13 years in this example?
Marian said, â€œI agree completely with Jerry. Purchasing real estate instead of renting is always better. Renting is the worst thing you can do unless it's a short term issue.â€
If this is true, how could there ever be such a thing as an unoccupied or abandoned house? Please think critically about this point before responding.
Your argument is based on a faulty premise. That being that real estate always goes up. Right now, â€œhome ownersâ€ are experiencing negative returns on their [quickly evaporating to non-existent to negative] equity. And, itâ€™s far from over. Whoâ€™s going to try catching this falling knife?
I do agree that housing and just about every other aspect of American life will be impacted as the massive boomer generation begins phasing out. However, I'm dubious about those suggesting that boomer retirements in NJ and elsewhere will forever doom the housing market.
For one, boomers have to live somewhere--and as we've already started to see some boomers reconsidering traditional retirements meccas of Florida, Arizona, etc. Believe or not, we may actually see more retirees staying put or moving down the road to retirement villas.
Secondly, where exactly will the US's projected population of 450MM by 2050 live? As suggested above, they won't all want to--or be able to afford--to live in a more crowded--and expensive--sunbelt.
Third, Morris to Monmouth were integrated into the sprawling NYC economic zone. The fortunes of that zone are IMHO are tied to global commerce of all shapes and size. It is a leading engine for a rapidly expanding world economy. As such, the region is the recipient of some of the nation and world's smartest and hardest workers--people that are quickly replacing baby boomers and adding tremendous economic value. Their home purchases are one reasons, for example, where some of Long Island's moderate to pricey communities have held in the current housing slump.
Finally, owning property far outstrips renting in terms of near and long term financial benefits. The idea that renters are somehow inoculated from the travails of the real estate market is just plain silly. If anything, they're more exposed--receiving neither the tax benefits, equity accumulation or protection from annual price hikes.
I'd love to receive a copy of the WSJ article. Could you send me this link: firstname.lastname@example.org
I agree completely with Jerry. Purchasing real estate instead of renting is always better. Renting is the worst thing you can do unless it's a short term issue.
The Schaffer Realty Group
I am not an expert on the NJ area, but I can tell you that over the past 40 years, on a national level, home prices have appreciated at 6.8%. Just like the stock market we must view the long term broad picture. Whenver we get into a bear market, whether it be the stock market or housing market, all the naysayers and doomsayers come out predicting it is the end of the world as we know it (sorry for stealing your line Michael Stipe.) But truth be told this downturn in the market will pass as well.
The 6.8% average rate of appreciation must also be viewed in the proper light. That figure is 6.8% of the value of the home. Most homeowners do not purchase their homes outright. If they did, then yes, they would be realizing a 6.8% return on their money. Most homeowners might put down 20% of the total purchase price. Let's use $300,000 as an example. So a homebuyer puts 20% of THEIR own money down on this $300,000 house, so that's $60,000. Based on the national average their home will appreciate at 6.8% or gain $20,400 in value. So the homeowner actually had a return on THEIR money of 34%. Factor in the tax benefits of homeownership and the return is even greater. That is why contrary to what some people may say, in the long run home ownership is always a good investment.
Fred....I don't understand the excitement and rush to congratulate John for "pouncing". I didnâ€™t know this was a forum for tally counts of who can one-up another, or pounce upon one another. Frankly, I appreciate diversity in opinions and do learn from it. But, I don't appreciate disrespect, attacks, or side line rah-rahs as if one were attending a boxing match.
Deborah Madey - Broker
Peninsula Realty Group