Cedar Crest	UPDATED: Friday, February 29, 2008
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Real estate reality

Posted on Friday, February 29, 2008

By Mark Abromaitis and Joel Keller
THE ERICKSON TRIBUNE

In the face of a softening real estate market, recent reports show that many sellers can still make significant profits today, and the prospects for 2008 are looking up.

It just depends on when you bought your house.

The realistic view
Lawrence Yun, the National Association of Realtors’ vice president of research, says in Realtor Magazine, “It’s all a matter of perspective. Home sales do continue to be soft. We’re predicting home sales to be down 7% … at the end of 2007, but that’s coming off of a five-year boom. We’re forecasting a sales level near 2002, a very good year, and a year that’s far closer to normal than we’ve seen over the past four years.”

He also says that homes, as investments, are still making people money. “At the same time, price appreciation is holding up better than media reports would have us believe,” he says.

A good return on investment
Even though selling prices are off from even a couple of years ago, for those who have owned their house for at least five years, selling now will still generate a large return on investment (ROI). Those who have been living in their houses for 20 years or more—before the most recent boom started—will reap an even larger return.

“While the news media spreads gloom on the New Jersey real estate market, we see incoming residents selling [their houses] quickly,” says Helen Waldrop, a retirement counselor at Cedar Crest, a retirement community in Pompton Plains. “They’re realizing significant profit over their initial investment as long as they purchased more than five years ago.”

Reports from the U.S. Census Bureau and the National Association of Realtors (NAR) support her claims. Statistics show that median home values in New Jersey have quadrupled in the past nearly 40 years. In 1970, the median
purchase price in New Jersey was $89,900. But today the median price is $391,800, which means these homeowners would see a whopping 409% return on their investment (see accompanying graph).

NJ Home Values

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On the front line
Penny Noval, a Realtor for Coldwell Banker, says most homeowners would be hard pressed to find as good an investment as their home, but many don’t realize it.

“What people need to focus on is not the past 18 to 24 months, but on what they paid 30 years ago and what they can get for it today. When they consider that logic, they’ll see that they’re still making a significant gain,” she says.

“Many people have doubled, tripled, or quadrupled their investment. What else could they have invested their money in and made that kind of profit?” she asks—a question she often asks her clients. “Plus, they had to have a roof over their head, so instead of paying rent they made a wonderful investment.”

Lisa Bentson, another retirement counselor at Cedar Crest, agrees, adding that there are other considerations that factor into people’s moves. “Many residents look at the lifestyle Cedar Crest offers and know that waiting in hopes of gaining $20,000 more for their home someday doesn’t justify another winter alone or another raise in their property tax bill,” she says.

A bright 2008
Yun says of 2008: “We’ll be helped by a significant drop in new home starts. Media reports tend to portray that as a negative—further evidence of troubles. But it’s actually really good for real estate because it keeps inventories down and price pressures up—and that’s what consumers really care about. The important trend lines for consumers are pointing in the right direction.”