Don’t Bet Your House

Don’t Bet Your House

The value of your largest single investment won’t soar – or slump

Forget about another old-style housing boom. Housing prices, which broke through the roof in the late 1980s and then crashed at least back down to the living room in the early 1990s, are setting back into a more comfortable and more familiar pattern until at least the turn of the century.

More homes were sold in 1994 than at any time since 1978, but that’s likely to be the best year for some time to come. In 1995, sales of existing homes are expected to fall 7 percent, according to Regional Financial Associates, a West Chester, Pa., economic consulting firm. The falloff in new home sales in expected to be even sharper.

The pace is not expected to pick back up again any time soon, RFA forecasts that the bottom should be felt in early 1997, with sales of existing homes down about 10 percent from 1994’s peak.

The sales slowdown doesn’t mean, however, that prices will drop. On the contrary, most experts predict it will rise 3 to 3.5 percent in 1995, about the same as the expected inflation rate.

The further south and west you go, the brighter the long-term outlook. While most of the South will grow on a par with the national average, prospects are better in North Carolina, Georgia, Florida, and Texas, which is booming again. Five of the ten fastest-growing states in 1995 should be in the Mountain States. Computer-related manufacturing and software growth will continue to buoy the Pacific Northwest. Meanwhile, in New England, , house price will only creep upward.

Never bet your house. Photo by Elena

aby boomers will continue to work their special magic on the housing market. Many boomers are now old enough and rich enough to pine for a second home. Expect vacation home sales to boom with the boomers. Those that aren’t in the market for another place – and some that are – will be trading up. WEFA, an economic consulting firm, estimates that there will be 24 million households in the 35 to 44 age group by the year 2000, some 20 percent more such households than there were at the end on the ‘80s. That, WEFA, says means that the trade-up market will be “very active” over the next six years.

Making sense of your mortgage payments: There are many tables which show what your monthly payments (principal and interest) will be assuming different interest rates and loan terms. For example, monthly payments for a $90,000, 30-year fixed mortgage at 8 percent would be at $ 660.39.

The top 132 housing markets: Spurred by low mortgage rates, the median price of existing homes nationwide is expected to rich $112, 703 in 1995, up from $109, 208 in 1994. Homeowners who live west of the Rockies were more likely to see the value of their homestead rise in 1994 than those who resided back East. The market rankings cover median prices for single-family detached and attached existing homes.

(Text first published in 1994, historical value).