There have been several numbers floating around in real estate during the past few weeks which ought to interest anyone now living indoors. In basic terms, the numbers say home values are soaring and property demand is likely to remain strong for years to come.
First, the good folks at the Federal Reserve have issued their quarterly flow of funds study, a document which tells us something about how the economy is doing.
For the second quarter of 2003 we find several important items:
· Home values nationwide totaled $15.3966 trillion at the end of June -- up $199.7 billion from the first quarter and a rise of $3.8837 trillion since 1999, or 33.73 percent.
· Despite the upward surge on Wall Street since March, the value of corporate stock stood at $5.0072 trillion at the end of the second quarter -- down $3.9849 trillion from 1999. That's a loss of 44.3 percent.
· The net worth of U.S. households is on the rise -- at the end of June household wealth stood at $41.2488 trillion, up from $39.5807 trillion in the first quarter. That's an increase of $1.6681 trillion or 4.2 percent. This is remarkable given that we have some 9 million people out of work and nearly two million who have simply given up looking for jobs.
The figures above do not tell us that all home values have risen or that every property is a good investment. Instead, what they say is that in the general case the demand for housing has been strong and remains strong because real estate has been a good place for most people to put their money.
The other number that should interest everyone comes from Fannie Mae: In ads broadcast in the Washington area, Fannie Mae says that, "The population is growing, and with it the American Dream of homeownership. In fact, with four million babies born in this country each year and millions more families moving to this country in pursuit of the American Dream, we expect the population to grow by 30 million by 2010."
Imagine the U.S. with 30 million more people in just a little more than six years. How are we going to house so many people?
Let's assume that our 30 million additional citizens will want to live in today's major population centers. Do you think commuting might be a little tougher? Do you think home prices will rise or fall given increased demand?
It would be nice to suggest that new home construction will handle the load, but that seems unlikely in a world where development is loudly opposed every time an unusual rodent, gnat or flea rambles within 40 miles of a given site. And "smart growth" advocates, who want to restrict development, only add to the problem.
Past results surely do not guarantee future trends -- but past results plus the addition of 30 million people are hard to ignore. If you want to know one reason why real estate demand will remain strong in the future, just look at the nation's delivery rooms, airports and harbors.
Written by Peter G. Miller