You”™ve seen the headlines in Time magazine and The New York Times: The home ”“ once a man”™s (or woman”™s) castle, the place that is like no other ”“ is looking less, well, homey these days. That”™s particularly the thought when it comes to owning rather than renting.
The home ”“ once the biggest purchase many of us are likely to make in our lifetimes ”“ is no longer a good investment.
Bunk, say local experts.
“They”™re fools,” White Plains real-estate investor Greg Rand says of those who would throw out the home baby with the housing-crisis bathwater. “It”™s the equivalent of saying, ”˜I lost money on a stock, so the stock market is no longer a place to build wealth.”™”
Rand is so bullish on the home as an investment that he left his post as managing partner of the family-owned Better Homes and Gardens Rand Realty in White Plains to become founding CEO of the new OwnAmerica, which provides services and products to independent real-estate investors and trains real-estate agents on how to assist investors. He says the naysayers overlook an important fact: One-third of all owner-occupied homes in this country are paid for.
There”™s one thing that experts like Rand and the naysayers agree on, though: Whether you view a home as an investment may depend on what your definition of an investment
“The idea of the home as a piggy bank has gone by the wayside,” says Chris Meyers, COO of Houlihan Lawrence in Bronxville, which leads the real-estate market in all price points in Westchester, Putnam and Dutchess counties. “(A home) is a long-term investment, like owning stock in an index fund that appreciates over time.”
Agents selling more by the numbers
Rethinking the long-term value of homeownership ”“ as opposed to the quick financial fix that got us into trouble in the first place ”“ has led to a shift in the way buyers buy and Realtors sell.
“We”™ve gone from an investment based on faith to ”˜Show me the numbers,”™” Meyers says. “Buyers today want good value. Relative to what the home traded at during the peak of the market, some are looking at getting a bargain.”
And that”™s true, he says, whether the client is rich or on a budget:
“Just ”™cause (the wealthy) have more money doesn”™t mean they”™ll pay more than the house is worth.”
As a result, he says, “We as Realtors are almost in the role of the financial adviser. It has to be backed by hard statistics. It”™s a lot more analytical.”
Carmela Sirico ”“ who specializes in relocations and properties in White Plains, Mount Pleasant and the Sound Shore for Keller Williams Realty in White Plains ”“ agrees:
“Any Realtor has to shift with the market. The language of selling has to change. We have to understand mortgages and match people with the right support services. Today there”™s no longer the stereotype of the real-estate agent saying, ”˜Oh, here”™s a pretty kitchen.”™”
Today”™s Realtor must be able to discern whether it”™s better for the client to rent or own. Sirico recalls a client who couldn”™t bear to part with his home for less than he thought it was worth but was no longer mobile enough to maneuver around the house. So he leased it and is now renting an apartment at Westchester Meadows in Valhalla ”“ a retirement community that includes a nursing home and an assisted-living facility as well as apartments for senior citizens.
It might also make sense to rent if you have to relocate frequently for your job, says Greg Rand ”“ whose monthly radio show, “Rand on Real Estate,” airs on 77 WABC and whose book Crash Boom will be published by Career Press in the spring.
The piggy bank is empty
Time was when America tended to rent rather than own. That changed with the end of World War II when the returning GIs were met with a construction boom and an assortment of loans for homeownership, business ventures and further education.
The phenomenon of the home as a piggy bank, however, didn”™t take off until the late 1990s, Chris Meyers says, when skyrocketing housing values enticed homeowners to borrow against their houses for a variety of reasons.
Those housing values are nowhere near what they were when the Dow peaked at 14,000 in October of 2007.
“We”™re down from the peak about 25 percent,” says Meyers, adding that we”™re nonetheless doing better than other parts of the country where the speculative boom went bust.
He and other experts see reason for optimism. According to the second-quarter residential real estate report from the Westchester-Putnam Multiple Listing Service Inc. in White Plains, Westchester experienced a 69-percent increase in the number of closed transactions over the second quarter of last year, while Putnam had a 41-percent increase. The median sale price of a Westchester home was $530,000 this past quarter, a 4 percent increase over the $507,250 median in 2009.
The first-time homebuyer tax credit, low mortgage rates and an upturn in the Dow all helped, although Rand cautions that we are five years away from seeing a real appreciation in housing.
Nevertheless, land remains valuable, particularly in the in-demand metro area, Meyers says. So, too, does the perhaps ingrained desire to own it and build upon it.
Says Sirico: “It”™s still the American dream.”
Tips to homeowning as an investment
Consider first whether you fit a renter”™s or an owner”™s profile: Do you, for example, have a job that may require you to relocate frequently?
Once you decide to buy, think of your home as a place to live in first and as an investment second.
As an investor, though, draw parallels with the stock market. You”™re not looking for the quick score. You”™re in it for the long haul.
Skip the McMansion. “It”™s expensive to get the extra square footage,” says Houlihan Lawrence”™s Chris Meyers, “and it”™s expensive to maintain.”
When you go to sell your long-term investment, remember that while you may not get the peak price, you”™ll still be getting more than it was originally worth.
Q2 Westchester and Putnam home sales
Number of closed transactions, up 69 percent in Westchester and 41 percent in Putnam over last year.
Median sale price of a Westchester condominium ”“ $352,250, down 6 percent from 2009.
Co-op unit median ”“ $169,500, down 5 percent from last year.
Median single-family house prices in Westchester ”“ up 8 percent, from $565,000 in 2009 to $607,500 in the second quarter of this year. (Nearly half of this was attributable to the expanding market share of the high-end, $1 million-plus sector that accounted for 20 percent of all house sales during the second quarter. This figure was up 3 percentage points from the second quarter of 2009.)
The median sale price of a Westchester home ”“ $530,000, up 4 percent from 2009.
Inventory of properties for sale at close of the second quarter ”“ up 3 percent in Westchester and 10 percent in Putnam.
Source: Westchester-Putnam Multiple Listing Service Inc. in White Plains
