Dear Windermere colleagues and friends,
To hear the pundits and self-styled experts tell it, home ownership as a goal for most Americans is over.
The message comes from national publications like Time magazine (“The Case Against Home Ownership”) and the Wall Street Journal (“the over-celebration of home-ownership), that the financial and social benefits were oversold; encouraging home ownership may have even contributed to the current difficulties in residential real estate.
To which I say: What bunk.
We’re not giving up on home ownership, and neither should you, nor should the people and communities we serve. Home ownership is too important to everyone to dismiss as some passing and outdated fad.
To tell people that home ownership isn’t a goal worth pursuing and attaining is to do them a huge disservice, not to mention being pure nonsense.
We’ve been through this before. In the 1990s some geniuses suggested housing had entered a period of permanent price deflation. To put it mildly, they were wrong.
So when the so-called experts revive their attacks on home ownership, and what we do, it’s worth reminding ourselves of the true story of the real estate market.
In September alone, about 379,000 homes and condo sales closed nationally (resale only; does not include new construction). That’s a lot of individuals and families for whom home ownership makes sense, even in uncertain economic times.
The self-appointed pundits may deride the notion of home ownership as an integral part of the American dream. But home ownership has a powerful allure to people just because it is how so many dreams are transformed into reality. Owning a home is how many Americans put down roots in a community. It’s the point of their lives at which many of them start and build families.
Our communities benefit when those people buy homes. Home owners have a stake in the condition and appearance of their neighborhoods, in the safety of their communities, in the performance of their schools, in the vitality of local businesses, in the array of cultural and recreational offerings available. For them, a home is not just an address – achieving home ownership is something to be proud of. They are making an investment – psychologically and financially, figuratively and literally – in the communities in which they live, work, shop, play and raise families.
Here’s a bit of statistical insight to keep in mind: Median home prices increased every decade from 1940 to 2000, according to U.S. Census data. In some areas, they doubled in each ten year period.
Warren Buffett, who knows a thing or two about investing, has said he can’t predict where stock prices will be in 10 months, but he does feel comfortable predicting where they’ll be in 10 years – up.
It’s the same with home prices. We can’t predict where they’ll be 10 months from now. They may be up in some markets, down in others. But I am comfortable predicting that in 10 years home prices will be above where they are now. Furthermore, home buyers get advantages not available with other investments. If you buy a gold bar, you pay the full amount, and it delivers no benefits while you own it. But homebuyers enjoy the benefits of leverage and the increase in their equity as the price appreciates (put 10 percent down on a $100,000 home, and if the price increases an average 2 percent a year, you’ve doubled your down payment in five years). They also get tax benefits from the mortgage-interest and property-tax deductions. Plus, they can live in and enjoy their home. They can’t do that with a gold bar.
So while Geoff Wood gave his perspective of the last 10 years, I can give my perspective as well, having been in this business for almost 50 years. I have been through a few ugly periods and recessions in the housing market – like the early 1980s, when interest rates soared above 18 percent.
And yet people still wanted to buy homes even in that economy, and we sold homes and survived. We will survive this too. Eventually the financial markets will right themselves, the economy will recover, and we’ll return to more “normal” conditions in housing – and home ownership will again, return to favor.
We’re not waiting around for that to happen. We’ll continue to help people find homes that are right for their lives, their lifestyle, their families, their aspirations and their budgets, helping them build their futures, their financial security and their communities’ well-being.
And we’ll be proud to have done so.
Founder and chairman, Windermere Real Estate