The Cyclic World of Housing
The other day, someone asked a real estate professional if they felt sorry about putting people into homes they couldn’t afford.
After being a little dumbfounded for a moment, the agent explained they didn’t think they had placed any buyers in homes, which fit that category. Many of their clients had been professional people, who had purchased nice homes with fairly traditional mortgages, at the height of the market. Some of them had sold other homes, pulling out equity to buy new homes.
Many had seen equity decline in the current market. However, knowing that housing markets are cyclic, the real estate professional told a personal story.
The agent had purchased their own home in 1983 for a mere $60,000. Around 1990 it was worth about $140,000. We had a real estate recession shortly thereafter, and the value went down to about $90,000. But two years ago, the value was about $327,000. Today, the home would be lucky if it appraised at $250,000.
Has value gone down? Yes it has! However, the house is still worth $190,000 more than what was paid for it back in 1983 (minus improvements made). But, the house has provided a roof over their head, and tax deductions from homeownership in the interim.
It is important to remember that housing is cyclic. And over the long haul generally increases significantly in value. It is still an excellent tax shelter for most folks.
When one stops to consider the home buying opportunities available today, with historically low prices, coupled with great interest rates and listing inventory, today can be seen as an rare window of opportunity for those interested in homeownership.
If you would like to explore homeownership for yourself and/or your family, please contact a GreatWest GMAC Real Estate Professional. We look forward to hearing from you!
Written for GreatWest GMAC
by: Myrl Jeffcoat
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