Home Values Rise Higher Than Stocks in 2000
blurb: Ever thought of your home as a blue chip investment?
A home is a smart place to put your money, even smarter than many
stocks if you compare growth in home values to Wall Street's
lackluster record in 2000. According to figures released by
Freddie Mac and Fannie Mae, the average home appreciated about
seven percent nationally since fall of 1999. That's a healthy
increase for homeowners, and much better than the dismal Standard
& Poor 500 index, for example, which is likely to register
negative returns for the year.
Investing in a home has never looked better than recent years. Housing
prices have grown between 5 and 7 percent over
the last three years, and by 29 percent total over the last five
years. They should continue to rise by about seven percent again
in 2001, according to Amy Cutts, Freddie Mac's senior economic
prognosticator. Either way, the booming economy and relatively
modest interest rates are acting like twin turbochargers on the
housing market, fueling growth in home sales and prices. In mid-
December, 2000, average interest rates for a 30-year fixed
mortgage fell to 7.17 percent, the lowest level since May, 1999.
Not only are home values climbing, the number of homes sold
climbed by 8.3 percent last year.
The only cloud on the horizon is the economic slowdown forecasted
by some economists and reflected in recent drops by the Index of
Leading Economic Indicators. A slowdown combined with losses in
the stock market might pinch available capital needed for
purchasing a home, a big ticket item exceeding $200,000 in many
metropolitan areas. Whether the housing market can sustain
itself at the 7 percent growth rate is an open question. The
hotter the market, the higher the prices, and the less affordable
if money gets tight.
Home values in the New England states continued to lead the
country, posting the largest increase at an annualized rate of
13.8 percent. The Middle Atlantic States region housing market
also gained in the double digits, registering a 10.9 percent
annualized growth rate, followed by the Pacific States, at 10.6
percent growth in value. The other regions posted growth of 6.5
percent or less, with the East South Central states finishing
last with an appreciation rate of only 3.4 percent annualized
rate of growth in home prices, which is still a positive gain
after taking inflation into account.
The National Association of Realtors was more conservative in
estimating housing values, putting growth at 4.4 percent for last
year. Freddie Mac says its measurement of home values is most
accurate, because unlike other indexes, its Conventional Mortgage
Home Price Index is based on observations of actual sales prices
or appraised values of the same homes over time. Whatever the
real number is, owning a home is a major purchase that, for now, is
outperforming many stocks in return on investment.
Sources used to create this article include Freddie Mac, Thomas
A. Fogarty and USA Today.