An excerpt from the weekly report (9/4/06 – 9/10/06) of the President and COO of Coldwell Banker, San Francisco Bay Area:
Homes in today’s market are either flat from last year or slightly lower (10% or less). Sellers need to remember that prices went up 50% plus from 2003-2005. A small reduction from the highs of last year still leaves outstanding returns, as real estate is a leveraged investment. The gains are substantial and well beyond any other asset class.
A great reminder if you purchased your home pre-2004, probably a bit surprising if you purchased in the past year (and were expecting continued “outstanding returns”), and something to consider if you’re in the market today.
Keep in mind that with leverage, the converse is also true, and a “slightly lower” market can yield “outstanding” losses. And while real estate gains from 2003-2005 might have been “well beyond any other asset class,” over the long run, the equity markets outperform real estate as an investment. And yes, we’re well aware that you can’t live in a share of stock.
∙ In the Long Run, Sleep at Home And Invest in the Stock Market [New York Times]
∙ Real Estate Vs. Stocks [Forbes]