A Great Time To Own!
A Great Investment
As chief economist of Stewart Title, which writes property title insurance
and closes real estate deals, Ted Jones has a sense of humor and a sense of
reality.
Aware that economists were spectacularly wrong about the
sustainability of the 2002-06 housing boom, he says, "Economists are never
supposed to give a number and a date at the same time."
In fact, Jones himself said in this column on July 20, 2002,
"The average home will go up in value 6.5 percent a year for the next
decade." For the four years following that prediction, it turned out to be
conservative. Home prices soared. Then they came crashing back down — by as
much as 74 percent from peak in Cape Coral — and are about where they were in
2002.
Still, he says real estate is back to being not just a good
investment, but a great one.
Jones, who does not like to be called "Dr. Jones"
even though he has a Ph.D. in economics, gave a lot of numbers in a talk to the
Sarasota Association of Realtors last week, and they all pointed to one
conclusion: "Overweight your investment in real estate," he said.
"It is cheap and on sale."
And it is a better investment than stocks over the past
decade, he said.
"Housing has outperformed, since 2002, the S&P 500 by
a factor of 2 to 1, even though housing has gone down 26 percent in value (from
the peak, nationally).
"S&P 500's dividend in the last 10 years averaged 1.8
percent a year. The dividend on housing, if you look at the census bureau
tracts every year, the average asking rent and the average asking price, and
you do the 10-year average between those two, it is 5.4 percent. So that means
the dividend for housing is a factor of more than 3 back to S&P 500.
"Going back to 1980, housing is up 225 percent, gold is
up 136 percent. Housing is on sale. It's a great time to buy."
Of course, not everyone is cut out to be a homeowner, as we
saw during the boom/bust, and indeed a "generation of renters" is
entering the housing market, said Jones.
"They don't have the financial ability to own a house for
the long term," said Jones.
"The people who own rental real estate are making a
heckuva return today," he said. "The people who are renting that
property are leaving a lot on the table. So it is a great time to be an
owner."
That is, if you can get a loan, especially with a distressed
sale on your record.
"We are still looking at a seven-year element if you have
done a foreclosure," he said. "There are alternatives to this,
however. One of them is owner financing.
"Another is that a large number of banks are saying, with
their pools of foreclosed real estate, 'We don't care if you have done a
foreclosure. If you have the financial acumen to make the monthly payments, we
may look at financing you.' It is higher risk, but because rates are at an
all-time low — 3.89 percent, the lowest since Freddie Mac started tracking the
mortgage rates back in 1971 — even if you had to pay a couple percent more, who
cares?"
Bill Hoyle
AARE CAI GSA
The According
To Hoyle Group
Your SW Florida Real Estate Connection
941-235-3528 /
877-75HOYLE
bill@accordingtohoyle.com
www.homespuntagorda.com