Home Prices Up 4.5%

greenwood_dickSM– Dick Greenwood, Director, Builder Marketing

2012 is over and the best one can determine is that home prices increased 4.5% on average nationally. I know some people will say 4.5% appreciation is not outstanding—they are right, however and it’s a big however, 4.5% appreciation is great news. Let’s look at it in a few different ways.

Say you purchased a home in January of 2012 for $200,000 and by the end of the year the home is worth $209,000. That is $9.000 in equity gain! Yes, gain. The key here is the home made money, not lost money. After the last five years, this should be music to every American’s ears.

Looking at it another way, government statistics say the average family of four makes $80,000 per year. This “average” family buys an “average” home at $200,000. At the end of the year, they have over $9,000 in what economists call “forced savings.” That is equivalent to getting an 11% pay raise. Equity in one’s home has always been important in America, now is no different. The Government Oversight committee said last month that half of all Americans could not come up with $2,000 in 30 days if they had to. This is why the concept of forced savings is so important and so relevant.

What 2012 showed America is that buying a home is the biggest and best investment that the average person could make and most economists feel this will hold true in 2013. We are seeing other indicators that suggest housing is a great investment. Out of 500 companies in the “Standard and Poor’s 500”, guess which company did the best last year? An-other clue: it’s stock nearly tripled. The answer is Pulte Homes! The widely read Motley Fool Stock Advisor says that housing should be at the top of your investment strategy for 2013, and they said in December to consider Pulte Homes, NVR Homes and KB Homes as stocking stuffers.

Street Authority Investor update says look at housing for 2013. They report that major, private equity firms with billions of dollars to invest are putting the money in housing, especially single-family. They say look at companies like Blackstone and KKR & Co. (Blackstone in Chicagoland wants to buy between 60 and 100 single family homes per week in 2013). The smart money on Wall Street is saying housing has bottomed out; is undervalued and sizeable capital gains can be made in the next few years.

All this points to one fact:
Housing is the biggest and best investment an average American can make.

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