As Boston Goes, so Goes the Nation?

By: Michael Sanborn

According to the S&P/Case-Shiller® U.S. National Home Price Index, there isn't a lot of good news in the housing market. But they make an interesting observation: 'During this cycle, Boston was the first metro area to report negative year-over-year returns, back in April 2006. In June 2007, Boston showed an improvement in its annual rate of decline from the value reported in May, -3.9% versus -4.3% reported in May. Boston has shown improvement since the beginning of the year, where its annual growth rate measured -5.5%. More data however, is needed to determine whether Boston, whose growth rate turned negative before other metro areas, is truly the first metro area to turn around.'

It should be noted that home prices in Boston have seen appreciation in recent months. The year-to-date -3.7% is diminishing due to the positive numbers seen in the April/May report of .8% and the June/July report of .2%

What's more important for those of us in the Northwest is to pay attention to the city posting the best year-over-year numbers: Seattle. With a 7.9% improvement in home prices in the greater Seattle market, investors would be wise to understand why that market is not negative. There are a number of reasons. First, the entire state of Washington has been overlooked in recent 'boom-town' investment sprees. Las Vegas, Miami, Phoenix, anywhere in CA and other locations have seen the mass investment and exodus of real estate investors over the last decade. There were many, many loans that I personally underwrote on properties in many of those locations and it was not uncommon to see a refinance into one 80% loan the 80/20 combo program used to buy the property one year prior. The property had appreciated so much (mostly based on other speculative buyers) in just one year that the investor could take cash out or greatly reduce the cost and still not have any of his/her own money into the property.

Investing in real estate no longer a 6-12 month payday attached to it. As with any investment, whether stocks or real estate, a balanced and long-term plan should be part of the strategy. If you can only afford to stay in the market for 6 months, you can't afford to lose.

Every one of the markets on the S&P/Case-Shiller® U.S. National Home Price Index report shows a gain since January 2000, including Detroit!. Los Angeles is up 162%, Miami is up 164%, Las Vegas is up 121%, Phoenix is up 112%, San Diego up 131% in the last 7 years. Is it any wonder that these markets are trimming the gains a bit to compete with other more affordable markets?

And those markets that are still seeing appreciation - Atlanta, Charlotte, Dallas and Seattle - they have not experienced the boom and bust levels of appreciation as seen in the now declining markets. Slow and steady wins the race - or at least that adage has been used in the past. Do yourself a favor and get rich slow. There is nothing wrong with the real estate market that a year or two won't fix. If you want to be a real estate investor, now is the time to buy and HOLD.
With the supply of homes on the market at a high point and mortgage rates at a low point, Seattle mortgage interest rates are right where a home buyer wants them.

America Properties
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