Monday - 7/9/2012 8:08 am
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The Washington Business Journal reports this week that area home prices will rise 7 percent in 2012 based on information compiled by real estate data firm ClearCapital. This is one of the best annual gains forecasts for any major market across the country. To fully appreciate the significance of such gains one most put into perspective the base upon which a market is appreciating from. It is no secret the DC Metro area has been largely insulated from the overall deep and prolonged recession compared to the rest of the Country. This is largely due to the number of quality Federal jobs located here.
With the economy projected to once again grow GDP by less than 3%, job creation continuing to disappoint and fixed investments and saving accounts barely yielding a one percent return, many are left wandering where to invest their savings. For most their home is their single largest investment. Earning 7% on one's largest asset while outperforming the S&P 500 is very attractive to many. We would all like to see double-digit gains on our homes but history has proven such gains are not sustainable. From a long-term perspective a home appreciating slightly above the inflation rate has provided reliable equity creation for homeowners. Factoring out energy as most inflation indexes do homes on average would over double this benchmark.
No industry as a whole has been harder hit by this recession and the mortgage crisis than homebuilders. The National Association of Home Builders (NAHB) recent poll saw industry confidence hit a five year high dating back to May of 2007. This will undoubtedly lead developers who have been performing balance sheet repair the past half decade to initiate new stock issuances to generate capital needed for expanding operations. Putting everything into perspective buying a home that will appreciate from an insulated foundation is significant. Other housing markets devastated by the past few years may at certain times show higher appreciation rates but from a much diminished and less reliable base. DC Metro's projected growth and Federal employment ties provide your clients, and in particular first time buyers, a more reliable opportunity to own a home where invested funds once again work for them.
Thad Musser is a Vice President at First Savings Mortgage and has over 12 years of mortgage banking experience with an undergraduate degree in Economics and a masters in Finance. tmusser@firstsavings.com ~ www.thadmusser.com.