Don't Wait to Buy Real Estate, Buy Real Estate & Wait

Why? Why indeed! The answer is and always will be the long term appreciation rate of a property. Appreciation is the increase in property value over time due to inflation and the effects of supply and demand imbalances. If the appreciation rate is high enough, about 1.75 points above the inflation rate, the value of the property increases faster than the outlay costs of taxes, insurance, maintenance and interest. This results in the experience of living for free. Long term appreciation rates will mirror the general rate of inflation. If they dont, the great leveling factor of supply and demand comes into play. A statistical review tracking repeat sales of the same homes, known as the Case-Shiller index, concluded that the price of existing homes increased by 3.4% annually from 1987 to 2009. The general rate of inflation during this period was 2.9%. Has the bottom been tested? The awful corollary of appreciation is depreciation. This happened in the late 2000s. Has it run its course? Well some of the best returns from Wall Street for the past 12 months have been realized by real estate mutual funds. PIMCO Real Estate, PRRSX, showed a 107.41% per share increase for the 12 months ended 4/30/10. To me this is an excellent indicator of how investors and finance insiders assess the national real estate market. Now here is my central point: There remains little undeveloped waterfront property in the Lakes Region; ergo the appreciation rate should not only keep pace with the national inflation rate but also allow a faster increase in value due to the demand exceeding supply. Low property taxes and interest rates, a growing population and the desirability of an area are other major factors, and which I have written about in earlier blog posts, that will also positively affect the value of Lakes Region Properties. Tomes have been written, are probably being written and likely will be written about the real estate fluctuations of the past 4 years. And though I prefer to retain a sense of the undiscovered nature of our area I imagine we can expect some focused attention on the Lakes Region of New Hampshire. Jim Ferriman Jferriman@spencerhughes.com 603-520-5385