For many U.S. residents burned by the housing bust, the notion that real estate can not only tread water but actually increase in value might seem a fairy tale. But, it’s not.
A Businessweek.com analysis of home sales data from the National Association of Realtors shows that 72% of the nation’s 25 biggest metro areas (i.e., 18 out of 25), home prices grew in value between 1990 and 2010.
Businessweek.com found that the Portland, Ore. area had the largest real price gain since 1990, with the median sale price in this year’s third quarter ($242,100) up about 85 percent over 1990, in inflation-adjusted terms. Home prices in the Denver, Baltimore, and Seattle areas also made gains of more than 50 percent in that period.
Despite recent housing woes, real estate remains one of the best investments the average American can make.
After recovery from the housing bust, “We expect house prices to settle into a price-growth trend that’s slightly higher than inflation over the long term. So in that sense, housing is still a long-term investment with a positive yield,” says Andres Carbacho-Burgos, an economist at Moody’s Analytics.
Read carefully: the key words here are long-term. And, an added benefit – unlike a stock certificate – a home provides a place to live. Of these 25 large metropolitan areas, listed fourth in the nation is the Seattle area.
4. Seattle-Tacoma-Bellevue, Wash.
1990 Price: $204,240 ($122,300 in 1990 dollars)
2010 Price: $308,200
Change in Real Dollars: +50.9 percent
Year Home Prices Peaked: 2007
Home prices in Seattle have grown significantly over the last 20 years. The metro area’s housing market exploded in the late 1990s as the population grew. Nominal price increases slowed in 2002 and 2003, but jumped to 19 percent in 2004, 11 percent in 2005, and 14 percent in 2006, show NAR data. Prices peaked in 2007 at $407,607 (in 2010 dollars). Adjusted for inflation, prices are now about 24.4 percent below that level.