This week our listings saw an average of 1.3 showings each. Showing traffic, offer activity, and home sales in general have been eerily slow over the past few weeks. Eerie because Halloween is just around the corner? Probably not. More likely it is because of uncertainty about the current economic situation.
The general consensus in among the media is that the recession is over and we are in recovery mode. Most say that the recovery will be slow. Everyone has an opinion. What I’ve learned over the past three years of this economic downturn is that all of the talk is speculation and if anyone really knew the answers, we wouldn’t be so afraid. What I do know is that prices are way down and interest rates are at record lows. Many are worried that prices will continue to fall, but if you look at real estate purely from a historical data standpoint, its a pretty darn good time to buy!
A very good friend said to me many months ago that residential real estate sales are likely to revert to being more about housing and less about investment return. This concept makes a lot of sense. Prior to the boom, when someone was thinking about whether or not to buy a house, the question of “rent vs. buy” was a considerable factor. Financially, does it make more sense to rent or buy? Certainly, when prices were way up, it was far cheaper to rent than it was to buy. Yet, people bought real estate in droves because they thought that it would continue to appreciate at very high rates.
Now that prices have fallen, buying real estate does appear far more appealing that renting. This is especially true when you consider that the interest portion of your housing payment is deductible on your tax return. The deductability can make equivalent rent or buy payments lean toward ownership. Then of course, ownership makes sense over the long term because no one wants to pay someone else mortgage. And lastly, the American Dream of home ownership is largely about making your house your home. Few renters are willing to spend time and money improving and personalizing a home that is temporary and not their own.
Trulia.com has recently published a Rent vs. Buy indicator that analyzes 50 metro areas and evaluates whether it makes more sense to rent or buy in those cities. The indicator is based on home prices vs. rents. Number one on the buy list was Minneapolis, MN with a value of 8 and number one on the rent list was (surprise, surprise) New York City with a value of 33. Charlotte’s rent vs. buy indicator value is 15 right along with San Jose, CA and Chicago, IL.
Trulia’s explanation of the indicator says that for cities with values from 1-15: “It is much less expensive to own than to rent a home in this city.” So, if you need one more reason to be bullish on real estate in Charlotte, NC….Trulia.com says buy.