U.S. Housing Market is Far From Proclaimed 'Crapshoot'

Karl Case, an economist who won the Nobel Prize in economics last year, was recently highlighted in a a CNNMoney post which claimed that the U.S. housing market is a "crapshoot". They used a quote from Case which explained that the belief that housing prices could 'never' depreciate was, indeed a falsity - a recent home he bought during that time lost around half of its value.

However, KCM founder Steve Harney recently stepped in to add another dimension to this article, indicating another aspect that prospective homeowners may find interesting.

The odds ARE ever in your favor

While Case did lose about half of the value of one of his properties, it is important to mention that this house was only one of three houses - and the other two houses did incredibly well:

  • The second property was purchased at $54,000, and later sold at over 4x that amount at $240,000
  • The third property was purchased at $375,000 and later sold for over $1,000,000

Essentially, Case laid some bets on 3 properties. One lost 50% of value; one gained over 400% of value; one gained near 300% of value. Great odds? We think so too.

A "crapshoot" worth shooting

If CNN truly claims that buying real estate is truly a gambling venture as their headline suggests, it seems that you have some incredible odds.

John Maxfield recently stated in a The Motley Fool blog post:

Over the past year, [home prices] are up by 8.9%. Over the past two years, they're up by 19.7%. Over the past three years, they're up by 23%. And there's little evidence that this trend is coming to an end anytime soon…

[It] should be obvious why now is such an opportunistic time to buy a house. Of course, if you want to wait, that's up to you. But doing so could very well be a source of regret later on down the road.

The positive state of the market

When it comes down to it, now is a great time for prospective homeowners to buy in. The 2014 housing market has been forecasted to be exceptionally positive, buying a home continues to be more affordable than renting, and mortgage credit availability is the best that it has been in 3 years. If you too fear that purchasing real estate is a gamble, these conditions are prime to assuage your fears. The best time to invest is now.

Questions on your process? Can we help you find a home? We'd love to help! Send us an email or give us a call and we'll be happy to discuss your options.


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