Myths & Facts in Today’s Real Estate Market

Myth: Home values are decreasing and waiting to buy a home makes good financial sense.

Fact: The average sale price for homes in Milwaukee, Waukesha, Washington, Ozaukee, and Jefferson Counties increased in 2006 in comparison with 2005 year-to-date figures. In every case, those 2005 numbers were an increase over 2004 numbers.

Myth: Interest rates have risen dramatically in recent months.

Fact: Interest rates are near all-time lows and rates in the 2000’s have averaged lower than those in any of the previous three decades. From 1971 – 2001 there were only 13 months where interest rates were below 7%. While interest rates are up from historic lows around 5.5%, a 30 year fixed-rate at approximately 6% is still a very attractive rate. 

Myth: Real estate is not a sound investment.

Fact: Thanks to the concept of “leveraging,” purchasing a home is by far the best long-term investment. For example, say you use a $10,000 down payment to purchase a $150,000 home, and the house appreciates five percent during the first year. That means after one year, the house would be worth $157,500 – a gain of $7,500. Your annual return on your $10,000 investment would be a whopping 75 percent. By contrast, putting the same $10,000 in the stock market and posting a similar 5 percent gain would only net a $500 return on investment.

As a homeowner, your savings continue to grow in two ways. Every year, a greater portion of your monthly mortgage payment goes to the principal, reducing the overall loan amount. Second, your home appreciates over time, making it one of the very best financial investments. Not only is homeownership a stepping stone to a future of financial security, it also helps to build neighborhoods and strengthen communities. Home values in the United States have proven to be a sound investment, and have risen 88% on a national average over the past decade.

Myth: If other markets throughout the United States have experienced a housing bubble, Southeastern Wisconsin will too.

Fact: All markets march to the beat of their own drummer as determined by a unique mix of demand and supply issues. Housing appreciation rates will vary significantly from one market to the next – and even within a single market – depending on demand, supply constraints, topography, consumer preferences and other factors. Because of the unique local nature of individual housing markets, the possibility that there will be any nationwide decline in home values is very remote, a point that former Federal Reserve Board Chairman Alan Greenspan, has repeatedly made in recent years when questioned about whether there is a housing bubble. 

Fact: We’re in a buyer’s market today. When it comes to building, remodeling, or improving a home, the advantage in a buyer’s market lies with the consumer.

Information provided by the National Association of Home Builders, The Wisconsin Realtors Association, and the Realtors Association of South Central Wisconsin. This article has been provided by the Metropolitan Builders Association, a non-profit and non-partisan association which represents the building industry in the metropolitan Milwaukee area. The MBA develops and offers education for consumers as well as members. By establishing business ethics and industry standards, the MBA has earned a reputation as a trusted resource. Consumers enjoy our promotions for housing and housing products, while members take part in our professional and social activities throughout the year.