Rent or buy? Officials say ownership is the way to go, and it's the right time for it
Neumann had owned homes in Tennessee, but she moved to Wisconsin nine years ago to be near her family. As a renter in Newville, she found herself needing to be even closer to her family in Janesville.
She assumed a new rental unit was in the offing.
But after a conversation with Lori Hagemann Davis—a fellow church member and real estate agent for Century 21 Affiliated—Neumann decided to investigate local homes for sale.
She looked at about 10 houses and ended up buying a condo—"half a duplex" is how she refers to it—on Janesville's west side.
"It's perfect, and for what I'm paying in mortgage I couldn't hardly rent," Neumann said.
Neumann is one of many people taking advantage of what real estate industry observers say is a perfect market: low interest rates combined with an extensive inventory inflated by an economic recession.
The American Dream of home ownership has been tested in recent years as homeowners watched the values of their home investments plummet.
"We've certainly heard that, and at times in recent years it might have made sense in some cases to rent instead of buy," said Rob Keefe, chairman of the Wisconsin Realtors Association's board of directors and president of Keefe and Associates, the parent company of the Lake Geneva-based Keefe Real Estate.
"It's a great time for young families starting out with that first job to buy. Home ownership is still as good a method as any to build wealth in this country.
"The opportunities are remarkable."
That's an expected refrain from someone in the real estate market, said Clark Howard, the nationally syndicated consumer expert who's heard and seen on radio and television stations around the country.
"Real estate agents always say it's a great time to buy, but this time they are right, and the fundamentals are there to support them," Howard said. "The bad news in most housing markets is mostly over.
"Not only is it a great time to buy a property at a ridiculously low price, but you can do it with a loan at a low interest rate."
The local real estate market is rebounding, according to Keefe's association.
Around the state, existing home sales rose 19.5 percent in April, the 10th consecutive month of double-digit sales growth.
In Rock County, April sales were up nearly 23 percent. On a year-to-date basis—2012 versus 2011—local sales were up more than 27 percent.
While the numbers of sales were up, the median prices of those sales dropped about 2.5 percent on both a month-to-month and year-to-date basis.
A flood of distressed properties—foreclosures and bank short sales—forced home prices down.
Statewide, median values increased in April but still are down when compared to last year.
"We're not seeing huge appreciation, but we're starting to see some," Keefe said. "I don't see home prices declining any further, and I really think we'll be back to historical levels in the next five years.
"People have to realize that an asking price based on what a home was worth in 2007 is still not realistic in 2012."
The U.S. Census Bureau reported in April that the rate of U.S. homeownership—65.4 percent—is at its lowest point in 15 years. The rate peaked at 69.2 percent in the fourth quarter of 2004, the high-flying days of the housing boom.
Howard said the bureau's report is a signal that the housing market will recover.
"I think it shows that there's a latent demand for housing that hasn't existed in a long time," Howard said.
Real estate agents share that belief.
Nearly 15,000 of them gathered in May in Washington, D.C., for a "Rally to Protect the American Dream," an event targeting legislators and policymakers on housing issues.
Just last week, TD Bank released a survey indicating that aspirations of homeownership are very much alive. Eighty-four percent of respondents 18 to 34 years old said they want to buy a home. Overall, more than half of those polled said homeownership is a vital component to defining the American Dream.
Keefe said values would improve as local markets clear backlogs of distressed properties.
"Rock County still has a lot of them to work through," he said. "You've got to get them cleared, and once they're off the market, the appreciation will follow."
Keefe said there's evidence that's happening, and inventories are being trimmed.
"As people begin to get back into the market, I think they will be surprised that there's not as much inventory out there as there was the last time they looked," he said.
"There's this perception that there's so much inventory, that you can take your pick, but it is tightening, and I don't think it's going to be a perfect buyers' market forever."
In Janesville, Neumann certainly had plenty of properties to visit.
She nearly pulled the trigger on a larger house with a fenced yard for her dog.
Instead, she bought a smaller place in what she said is a perfect neighborhood. It has a large basement, a nice patio and a tax deduction she wouldn't receive if she had decided to pay more to rent.
"With the larger house, there would have been much more maintenance," she said. "I talked myself out of it, and I decided to downsize.
"I'm so glad I did."
Last updated: 8:52 pm Thursday, December 13, 2012