the collective, REALTY Blog
LOS ANGELES-State of the Housing Market: Year End, 2014
Home prices are ending the year on a stable note, according to new year-end data.
The Case-Shiller Index — which tracks prices nationwide and in 20 major cities — reported prices grew 4.6% in October compared to a year earlier. That’s the slowest pace since September 2012, but one which many economists say is healthier for both buyers and sellers than the double-digit growth seen this time last year.
In the Los Angeles area, prices were up 4.9% year over year. Prices here ticked up 1.6% in October after being basically flat the last three months, and now sit at levels last seen in December 2007.
Housing definitely came back to Earth over the second half of 2014, and we welcome and expect to see more of the same as we look ahead at 2015. A slower-moving housing market is inherently more stable, more balanced between buyers and sellers and more sustainable over the long term. We’re ending 2014 on a good note, and this momentum will continue.
What does a “slow moving” housing market mean to home owners. Let’s look at what a 4.9% growth rate means as a return on investment.
A million dollar home cost a buyer on average a $200,000 cash outlay. That leveraged them into a $1,000,000 asset that increased by $49,000 in 2014. That’s a 24.5% return on their initial investment. Not bad for a “slow moving” market! It’s all about the leverage. That’s how smart investors build wealth and the rich get richer.
Also, it should be noted, mortgage rates in the U.S. declined, keeping borrowing costs at the lowest levels since May 2013. Paul Diggle, U.S. property economist for Capital Economics Ltd., London, said mortgage rates have moved “from low levels to lower levels”. The average rate for a 30-year fixed mortgage is now 3.8 percent, the lowest since May 23, 2013.
Housing demand has been restrained by tight credit standards, which are easing, and sluggish wage growth which is starting to trend up. Low borrowing costs should continue to make purchases more affordable. Federal Reserve Chair, Janet Yellen, said the central bank is likely to hold rates near zero at least through the first quarter.
Owning a home, even in a “slow” market, is one of the safest and smartest investments a person can make. They aren’t getting cheaper and interest rates can’t get lower.
Buying property now is investment gold. I think the technical economic term for this is a “no-brainer”.
Article Contributed by, Marc Grayson of “the collective”
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