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REALTOR®: Homeowners Still Gain Over the Long Term

Wednesday, February 4, 2009

When you look closely at who are experiencing real estate gains and losses, the overall picture comes into focus, according to Julia Keady, president of the Silicon Valley Association of REALTORS®.

"Short-term fluctuations don't have as much impact on owners and investors who bought with a long-term perspective," Keady explained.

According to the National Association of REALTORS®, over the past three decades, home values have risen an average of 6 percent annually. Of course, all real estate is local, and markets vary by region. In some markets, people who bought homes within the past year or two have seen the value of their investment go down.

But real estate is not a quick-in, quick-out investment. "Real estate market conditions are like the weather forecast – the local conditions are much more meaningful than national data," Keady said.

While some homeowners who have seen gains over the long term may perceive losses because of short-term market fluctuations, statistics from MLSListings Inc., the Multiple Listing Service of the Silicon Valley Association of REALTORS®, shows there is, indeed, long-term value in homeownership. Over a five-year period, a number of Silicon Valley neighborhoods show long-term gains. Between 2003 and 2008, the median price of a single family home in Palo Alto increased 72 percent, from $900,000 to $1,550,000; Cupertino, 52 percent, from $780,000 to $1,187,500; Los Altos, 53 percent, from $1,172,000 to $1,797,500; and Mountain View, 45 percent, from $678,750 to $982,000.

"In most cases, consumers and homeowners who are in it for the long-term will come out well ahead," Keady said.

The long-term value of housing as an investment is compounded by the power of leveraging. A $10,000 used for a down payment on a median-price U.S. home at a typical home price appreciation of 5 percent will return $110,000 after 10 years. In good times, the same $10,000 invested in the stock market appreciating at 10 percent annually will return $23,600. A recent study disclosed the average homeowner had $184,400 in net worth versus only $4,000 for the average renter.

Times of crisis often turn out to be times of opportunity. Falling prices present opportunities for serious first-time homebuyers, especially as rates continue at an all-time low.

"In many areas, this may be the best time in years to buy a home," Keady said. "Those investing in a home and keeping it for a typical holding period of six to 10 years will likely see their investment pay off financially. At the same time, they will enjoy all of the non-tangible benefits of homeownership."



The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.

The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.

Variations of this article have appeared in local area newspapers.

For further information, please contact Rose Meily at SILVAR Public Affairs, email , or phone (408) 200-0109.

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