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Sunday, April 11, 2010

Real Estate: The Investment of Choice


As the federal tax credits for home buying near the April 30 expiration, consumers are taking notice. The National Association of Realtors reported that its pending home sales index climbed 8.2% to 97.6 in February. The surge is similar to the one seen in October prior to the November 30 end date for the original homebuyer’s tax credit.

Will there be a third surge somewhere down the line? That's difficult to say, but the lobbying is on. NAR lead economist Lawrence Yun commented last week that another surge is needed to stabilize prices and reduce inventory, suggesting that extending the credits again wouldn't be the worst thing the federal government could do for housing.

Some remain unconvinced. Some think the credits have run their course, so any extension would have a marginal benefit at best. That's okay, though, because the market is close to taking over. According to a recent Fannie Mae survey, two out of three Americans think it's a good time to buy a home – a percentage that matches responses in a similar survey in 2003 – while 31% believe it's a very good time to buy. Seventy percent of the respondents said that buying a home continues to be one of the safest investments. To put that in context, 74% ranked a bank account as a safe investment while only 17% viewed the stock market as safe. Real estate remains the investment of choice.

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