As the national and regional real estate market begins to recover, albeit at varying rates in different locations, the customary debate continues.
Is it time to make the move into real estate or spread the risk in stocks or currently low yielding bonds and cash equivalents?
The tables below show cost of an investment in a Bend median-priced single family home in 2002 compared to the broad S&P 500 stock index at that time. The baseline date reflects the first full year following the 9-11 terrorist attacks.
In summary:
· A median priced Bend single family home purchased at the end of 2002 would have appreciated by 20%, from $190,557 to $229,000 in October of 2012.
· The price of the S&P Index for the same 2002 to 2012 period rose 55%. The starting point reflects the first full year following the 9-11 terrorist attacks.
· The median home price in Bend for a full year has dropped by 36% since the 2007 peak of $358,000.
· The S&P 500 Index also peaked for a closing day price of $1,561 in October of 2007, then dropped steadily with occasional trends upward until the financial crisis came to a head in the Fall of 2008. That began a slide with minor corrections until a bottom 10-year closing price of $683 in January of 2009.
Granted, the real estate side of the comparison is based on single family homes, rather than specific income producing properties, such as residential or commercial investment properties.
For an owner-occupant of a home there is the practical utility of a place to live in and enjoy. There's not much immediate short-term practical use for a investment on paper that may take years to realize. And not many investors would have the nerve and patience to stick with a stock market index, or the ability to deftly time their buying and selling over an extended period.
STOCK MARKET – S&P 500
Date
|
Open
|
High
|
Low
|
Close
|
Volume
|
Change %
|
Historical Rating
|
01/03/2003
|
908.49
|
911.25
|
903.07
|
908.59
|
1,560,300,000
|
10/25/2012
|
1,409.74
|
1,421.12
|
1,405.14
|
1,412.97
|
557,434,364
|
up 55% from post 9-11 full year (beginning Jan. 3, 2003) to October of 2012
08/01/2008
|
1,269.42
|
1,270.52
|
1,254.54
|
1,260.31
|
3,620,107,122
|
up 11% from pre-crash (Aug. 2008) financial crisis to October of 2012.
However, an investment of $1,000 in the S&P Index in early 2009 would have grown to approximately $2,000 in late 2012, as the index rose from its post crash bottom.
However, an investment of $1,000 in the S&P Index in early 2009 would have grown to approximately $2,000 in late 2012, as the index rose from its post crash bottom.
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BEND SINGLE FAMILY HOUSING:
Median home price for 2002: $190,557
Minimum
|
0
|
1.00
|
498
|
$40,000
|
$37,500
|
0/0
|
Average
|
3
|
2.19
|
1,854
|
$242,367
|
$237,795
|
142/140
|
Median
|
3
|
2.00
|
1,728
|
$192,999
|
$190,557
|
109/109
|
Maximum
|
8
|
7.25
|
6,191
|
$1,495,000
|
$1,400,000
|
1465/1226
|
Total Dollar Value
|
$420,658,765
|
Median home price 2012 (thru October): $229,000
Minimum
|
0
|
0.00
|
624
|
$49,000
|
$53,000
|
0/0
|
Average
|
3
|
2.38
|
2,078
|
$278,588
|
$272,130
|
137/150
|
Median
|
3
|
2.50
|
1,910
|
$233,400
|
$229,000
|
101/105
|
Maximum
|
6
|
6.00
|
6,869
|
$1,695,000
|
$1,625,000
|
1760/1819
|
Total Dollar Value
|
$507,794,808
|
up 20.17% from post 9-11 crash to October of 2012
Median home price for 2007: $358,500
Minimum
|
1
|
1.00
|
624
|
$142,500
|
$135,000
|
0/0
|
Average
|
3
|
2.40
|
2,101
|
$467,230
|
$448,930
|
171/189
|
Median
|
3
|
2.50
|
1,965
|
$369,000
|
$358,000
|
140/162
|
Maximum
|
7
|
5.50
|
5,960
|
$3,500,000
|
$3,500,000
|
806/806
|
Total Dollar Value
|
$745,223,180
|
down 36.12% from peak year 2007 through October of 2012
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S&P 500 – 10 year performance
