Real Estate

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Americans are, to coin a phrase, nuts about real estate. Recent years have seen a simply amazing climb in the number of properties sold and the prices those properties have commanded.

This unprecedented boom is due largely to the historically low interest rates in most states, combined with many areas where demand has simply out-stripped supply for housing, due to increased immigration and demographic change. However, there is also a genuine passion, or some may even claim, mania amongst individuals for owning property.

Valuations of real estate have shot up since the turn of the millennium, leading several observes to worry that the cost of housing is in fact unsustainable at current income levels. However, this has not been quite the issue that housing experts have predicted, and while prices have not been increasing at quite the same rate, they are still climbing too much to suggest a plateau has been reached.

One obvious reason that Real Estate remains so popular, is that it is so much cheaper to pay even a high mortgage than to live in an equivalent rental property. Plus, with rentals, the money spent is very much 'dead', whilst when paying your mortgage, each month brings you closer to owning the place where you live.

Of course, not everyone is suited to purchasing their property. Indeed for many, renting is preferable, usually because they may move around. Plus, each move costs the owner a considerable amount in removal fees, stamp duty and plenty of other hidden costs.

With the aforementioned immigration and demographic shift, the need for good quality rental property has significantly increased. Thereby opening a sizeable new market for the 'buy-to-renters'. Individuals who buy up affordable real estate and with limited investment, but occasionally structural alterations, manage to rent out their new properties at high rates, making a great deal of money. Many individuals have even been able to buy up several properties, either close together or in different towns, and live off the proceeds of the various rents.

However, for every individual that this dream scenario has worked out for, there are many dozens more who have struggled to recoup their initial investment. Which means home owners have relied upon sound advice and assistance from agents or management services, allowing these companies to forge their own niche in the market. For example, in California, over half a million people own real estate licenses. That is one for every 52 adults living in the state!

This enthusiasm for property purchase is under-pinned by the opinion that owning your home is a sure fire way to make money. After all, houses have not fallen in value for so long that you are virtually guaranteed to get more money back than what you paid for it in the first place. Few investments can offer that kind of promise.

Little surprise then, that almost 7 in 10 of American homes are owned rather than rented.

Furthermore, houses do yield better returns than the majority of other, usually riskier, investments. The price to earnings ratio of real estate is also relatively high, indicating housing is a sound way to make some money.

This in itself has lead to a psychological shift in the mindset of consumers who know not only see their home as somewhere to live, somewhere that is effectively shelter, but also as an investment. This in turn has helped lead to a growth in home improvement and adding value to a property. In itself a very profitable industry.

The various issues surrounding the real estate market have made an industry swell. No dinner party is complete without the topic of conversation turning to 'how much that holiday home cost' or 'whether that second home is going to pay for itself' or even 'whether its worth converting the loft into a spare room'. There are no end of television programs or books on the theories and practice of real estate. All adding fuel to the fire that rages in American's heads about Homes Sweet Homes.

Featured State: Arizona

Information provided courtesy of HomeRoute.