By:Dennis Norman
Dennis Norman
Last night my sister sent me a link to a video about children in Uganda and their battles with starvation,sickness and life without parents. Wow,when we are made aware of things like this it is really an eye opener to just how blessed we are,particularly here in the US. It really puts things in perspective.
Lawrence Yun,Chief Economist,NAR
This morning I arose still thinking about the video as I was reading some Google news alerts as well as doing some research on REALTOR(R).org. After skimming through news reports,economists comments,etc there were a couple of things that got my attention. One was a news story on Bloomberg.com which said home prices dropped in 70% of US States in 2008 and the other was a commentary by Lawrence Yun,the Chief Economist for the National Association of REALTORS(R) in which he cited some interesting facts,including that there are 76 million homeowners in the US today compared to 40 million in 1970.
This made me think that with all the gloom and doom news about real estate today maybe we need to put it in perspective:Lets look at the Bloomberg story for starters. Yes prices have dropped in the past year and,quite frankly,I’m surprised it was only 70% of the states. I think it is clear that in the last few years of the boom prices got out of hand and outpaced inflation and income so a correction was probably imminent. But,if we look at more than a 1 or 2 year period and stop comparing the current market to the boom market,is real estate really that bad off?
According to the National Association of REALTORS(R) the median home price for existing homes in 2000 was $147,300 in the US. As of November 2008 it was $181,300 or an increase of 23% in the 8 year period. Some economists and others are predicting that real estate prices may still fall another 10% –15% so lets be really conservative here and take that November price down 15% to $154,105. That would mean at the absolute bottom of the worst real estate market perhaps in history as well as the potentially worst and longest ression in history real estate prices would still have risen almost 5% since 2000. Granted that’s not a record-setting return,and I don’t know about you,but right now I would be doing cart-wheels if my IRA had increased 5% in that time period instead of what it has done.
The other thing that hit me too is that home ownership has almost doubled in the US since 1970 as stated by Lawrence Yun. The US population in 1970 was 202 million and for 2008 was estimated at 303 million for an increase of about 50%. So,during the period the population grew by 50% home ownership doubled and now 70% of American families own their homes.
So in spite of all the black-eyes real estate has been receiving perhaps when we put things in perspective there are some bright spots? Afterall,real estate for most people was always thought to be a long term investment and shelter for our families. It was only in recent years that it was turned into an asset you “day-traded”like a stock. Don’t get me wrong,I’m not saying the market has not impacted many people hard including myself,I’m just suggesting we also look at the big picture and keep it all in perspective.
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