This paper intends to make a case for 3 key points:
1. Real estate statistics showing national appreciation figures are miscalculated and misleading http://www.cheapnmdoutletsale.com/ , causing alarming reaction to reasonable market appreciation in most cases.
2. The Baby Boom population is going to demand second homes, and is bigger than just US boomers.
3. The market for condo hotel units and innovative forms of secondretirement home ownership is on the verge of a boom, not a bust.
I. The Bubble: Debunked
Our media has dramatized the entire US real estate market as ?overheated?, ?bubble like? and ready to crash at any moment. Even conservative economists point out that there are only pockets of ?froth?.
Real estate is NOT red hot all across America. In fact, many mature US real estate markets are soft, measured in real (inflation adjusted) terms they may even be declining in value. But media has a hard time making a 0.3% home appreciation rate in the industrial Midwest news Cheap Adidas NMD HU Trail , while 28% gains in once rural or underdeveloped areas of Arizona or Florida is exciting headline news.
Midwestern populations are migrating to sunny, Southern and Western States at increasing rates, by purchasing ?future residences?. The trend is evident, but quiet, because many northerners are maintaining 2 residences for the time being. But will there be a mass exodus when the bulk of boomers retire? Is the real story not the over heated markets of the south and resortsecond home areas but rather the future potential implosion of values in the heart land? Is the bubble actually in the markets with low appreciation rates?
What is an appreciation rate, and who is measuring these stats? The National Association of Realtors Cheap Adidas NMD HU , The Federal Home Loan Bank, Fannie Mae, and The Federal Reserve all have a role in compiling the statistics. But what is disturbing is the lack of economic reason that seems to enter the public debate after the official statistics are released to the media.
The media announces that a home in the Southeast rose by 14% in value, Northeast by 9%, Midwest by 4% and in the West by 13%. This would lead a $100,000 home owner in Utah to believe he gained $13 Cheap Adidas NMD XR4 ,000 while the San Fransican gained the same amount? There is no discussion of inflation adjustments, or renovation investments, or regional job or emigrant growth, all factors that might have effected the real gain. How does such a useless statistic as ?appreciation rate? even find it's way to page 12, let alone the headlines?
Markets are regional, and regions are micro Cheap Adidas NMD R2 , not macro-economic studies. Consider appreciation then in an individual micro-economic example.
The RefinanceRenovation Effect
In 1998-2003, low interest rates ignited record home refinancing, many homeowners pulled ?cash out? to reinvest in their homes:
A $100,000 home in 2000, with $60,000 in debt may have been refinanced to $75 Cheap Adidas NMD R1 ,000 (75%), with $15,000 cash out going right back into the home in capital improvements. This home then sold for $120,000 in 2001, wealth was created, but less than the statistics assume. Did it rise by 20% in ?appreciative? value? Or did the improvements and borrowing just increase the value? National statistics measure this as a 20% rise. You decide Cheap Adidas NMD Shoes , then multiply by your neighbors who added additions to their 1940's bungalows between 1999-2005. If the national appreciation rate was recalculated to account for home renovation expenses, real gain in value would be determined and would be a much more calming and useful statistic to determine if housing is ?overheated?.
The Redevelopment Effect
America's housing stock in 2000 was on average 47 years old. The rise in Home Depot stock should be a market indicator of where Americans are shopping ? home improvement. At the same time urban areas are seeing unprecedented regentrification. When a blighted area is improved, values go from zero. The calculated appreciation rate is spectacular.
Farmland to Suburbia
Don't the Housing Statistics adjust for this effect? NO. For example, when a corn field sells for $5000 an acre, then $50,000 per lot Cheap Adidas NMD , then $500,000 per home the stats reflect an appreciation rate without regard for the capital investment that went into this meteoric rise.
The Currency Effect: InflationDeflation, Quiet and Invisible at First
The frothiest real estate markets are also the most popular with foreign buyers. Is this a correlative or causal effect? The US Dollar has fallen against the EURO by 11% since July 2003. For real estate buyers spending EURO, an 11% rise in second home prices is invisible. With official inflation at 2.8%, a 14% rise in prices is static to European Investors. Incomes in Europe have also outpaced US wages by another 4.1%. Therefore, US property values could rise 18% higher with no additional cost a European buyer. This fact is very important to real estate appreciation rates. Foreign buyers can purchase relatively easily, but cannot sell any faster than US owners and will can sell at lower relative values if the currency trend switches. Markets where high concentrations of foreign buyers exist will be more volatile for this reason.
The Interest Rate Effect: Reversion to The Mean?
Will appreciation rates revert to the 30 year mean of 5% (or below) when interest rates rise? Real estate values have risen due to the low ?cost of capital? since 1998. Certainly low rates have added fuel to the speculative fires of real estate investors, and froth has been created by easy money. Zero down loans to first time home buyers, easy no doc loans to investors, banks competing for borrowers, even the internet have all made capital less costly and driven the real estate market higher.
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14.01.2020 02:55
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