Housing Investment for the Long Haul

November 4, 2011, in Economist Commentaries, by Lawrence Yun, Chief Economist, NAR 

Home prices took a rough ride in the past decade. The past 10 years were  an anomaly fueled by easy credit availability. Those days are over – and for the better. Most Americans believe in hard work (and not easy credit) before being able to enjoy the fruits of their labor.

The chart below shows the long historical trend in median prices of a single-family home in the U.S.   A typical buyer purchased a $23,000 home back in 1970. The monthly mortgage payment on that home, assuming a 5 percent down payment, would have been $153 per month for 30 years. So a homeowner who did not do a cash-out refinance would  have paid off their mortgage by the year 2000. So imagine no further rent or mortgage payments. Currently in America there about 25 million homeowners who own their homes free-and-clear.

On top of no mortgage payments, the median price of a home in 2000 was $143,000. This is something a person could bequeath to their loved ones when the time arrives or even use for charity donations: the fruits of one’s lifetime labor being put to a good use.

Home prices took a rough ride in the past decade, it’s true. But let’s not forget about the very basic and long-term benefits of homeownership for those who are willing to stay well within their financial capacity.

By Helena Nordstrom, TeamNordstrom, Realtor with Signature Sotheby’s International Realty, Sarasota

Per & Helena Nordstrom

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