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Buy a home for love, not money

“It’s not just a home, it’s an investment” was the line several generations of real estate agents used to edge nervous first-time buyers into home ownership.
It is a line few buyers are likely to hear today.
While home owners have been slow to accept the fact, residential housing’s investment value has been heading south for as long as six or seven years, says John Mooney, president of the Essex Investment Group Inc.
Real estate agents and brokers concur.
“We don’t use the word appreciation anymore,” says Michael Haymes, co-owner of Re/Max Realty Group Inc.
Instead, he stresses factors such as the tax advantages of home ownership, or how home owners can get more for their money than renters.
“If you’re looking for an investment, put your money in mutual funds,” Haymes advises buyers.
After 40 years of virtually guaranteed appreciation on just about any residential property, the market went supernova in the mid-1970s. During much of the 1980s, some homes doubled in price in as little as a year. Now, experts say, the party is over. The real estate market ain’t what it used to be.
In today’s market, some homes appreciate, some depreciate. And those that do increase in value see more modest appreciation over a longer period of time.
And while lower prices and favorable interest rates–as low as 6 percent on some 30-year and 15-year fixed-rate mortgages–could conceivably return some of the 1980s snap to the market, experts expect the current trends to continue for the foreseeable future.
Economic uncertainty will keep a lid on home prices, believes Julie Holzbach of Lowenguth Realty Ltd. Major corporations show no signs of letting up on downsizing, she says, a trend that crimps many workers’ plans to upgrade. Low interest rates and relatively cheap prices are not enough to tempt buyers who cannot be sure if they still will be working in a year.
The prevailing mood among buyers is cautious, concurs Haymes. Home shoppers are choosier. They want more for their money and are slower to jump on a deal. Homes in the most desirable locations can still move quickly, but only if they are in close to perfect shape. Sellers who do not aggressively court buyers, meanwhile, can have a long wait.
Corporate restructuring also is putting a crimp in the relocation market–yet another damper on housing prices, says Glenda Nemes, head of relocation services for Rick Leasure Realtors Inc.
Major firms are starting to balk at picking up relocation costs, she says. In the past, such firms routinely covered the difference for relocatees who had to take losses on selling their homes, and often reimbursed employees for improvements. Now, an increasing number of companies expect workers to absorb such losses.
Some employees, caught in a squeeze between falling home values here and higher prices in the area to which they are being transferred, face significant enough financial losses to turn down promotions or even quit the company, Nemes says.
Also squeezing prices on the market’s upper end is a steady supply of new homes, she adds.
“We’re already overbuilt in the over-$200,000 market, and the builders are still building.”
Demographic trends, too, will help keep a lid on home prices, Mooney believes. As postwar baby boomers head for retirement, he says, many will move to smaller homes, condominiums or apartments, decreasing the buyer pool for single-family homes.
Greater Rochester Association of Realtors Inc. figures show the median price of homes sold in the Rochester area during the first 11 months of 1995 to have actually increased marginally over the same period in 1994, rising 0.6 percent to $84,500.
However, say brokers familiar with the market, the median figure–which represents the midpoint between the highest and lowest prices fetched–does not reflect the drastic downward shift in the prices of some homes or the months that many homes sit on the market as sellers steadily lower their asking prices.
Still, the news for sellers is not all bad.
Home values are not falling across the board, says Rick Leasure’s Nemes.
While prices are headed down in many Rochester neighborhoods, many suburban homes have retained value or even shown slight appreciation, she says. However, even in the suburbs, the most upscale homes are taking the biggest price hits.
For sellers with properties in the most desirable suburban locations priced at $150,000 or less, the market can still be brisk, Nemes says. Homes priced between $150,000 and $200,000 are “a gray area.”
But owners of luxury homes who bought at premium prices in the late 1970s or early 1980s stand a fair chance of taking a loss if they sell now, she says.
Haymes concurs.
“In the last three deals we did, the owners took hits,” he says.
For some, this can be a bitter pill to swallow.
One agent, who for several months has listed an attractive renovated city home, says it took some convincing to talk the owner into listing it at any price below what he thought the property should bring.
In the meantime, the agent says, the owner has turned down several offers at what many would call a reasonable price, and intends to settle for nothing too far below the current asking price.
The owner could be in for a rude surprise as prices continue to slide, the agent confides with a what-can-you-do shrug.
For such sellers, Holzbach has her own greeting:
“Welcome to the ’90s.”

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