Moody’s Projects Housing Will Be A Losing Proposition Over The Next Decade
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I am not certain that these numbers have any merit whatsoever, but I came across them at the MSN Real Estate site and figured I would put them up for discussion. The chart has the projected 10 year increase in property values for 15 major metropolitan markets. It was done by Moody’s Economy.com and I think that if these numbers are true, than holding real estate is going to be a losing proposition over the next decade as inflation will eat away all of the economic benefits and profit.
The other group that better pray that these numbers are wrong are the local governments as much of their income comes in from property taxes. There is not much room for raises or services unless they ramp up the tax rates quickly.
Region 2Q 2006 2Q 2016 % increase
Washington D.C. $435,899 $450,747 3%
New York $558,853 $611,045 9%
Boston $416,911 $481,184 15%
Philadelphia $230,495 $269,818 17%
Minneapolis-St. Paul $244,186 $286,397 17%
Chicago $290,953 $360,018 24%
Los Angeles $538,477 $667,048 24%
Miami $399,348 $498,564 25%
Atlanta $172,722 $227,488 32%
St. Louis $147,359 $195,607 33%
Phoenix $284,727 $378,914 33%
San Diego $624,987 $856,067 37%
Houston $147,496 $214,370 45%
Dallas $162,461 $245,725 51%
Seattle $384,543 $612,383 59%
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Comment by Dan on 26 September 2006:
You wrote:
“There is not much room for raises or services unless they ramp up the tax rates quickly.”
I strongly disagree. Assessments have gone through the roof as property values have gone through the roof. Any local government official who wants BOTH, higher valued assessments AND increased tax rates should be thrown out of office as soon as possible. Governments have ridden the same gravy train as speculators with legit home owners paying the tax bill.
Comment by Jim Davis on 26 September 2006:
It must be noted that Moody’s sells their services to investors that are primarily interested in the securities markets. Do they have a vested interest in steering their clients toward securities rather than real estate? One wonders about the accuracy of any similar reports published by Moody’s in 1996 that forecast growth through 2006. Did they come close to correctly forecast the growth we have seen in the past decade? I doubt it.
Comment by Tom on 26 September 2006:
Dan - Great point, I was a step ahead of myself as I expect everyone to recognize the ever present greed of the politician wanting more money. If these numbers hold up, they will have spent the appreciation too fast and gotten an infrastructure they can not afford.
Jim - outstanding point. Panic the investor class to profitable securities not that evil (we do not make a commision on) real estate.
Comment by Michael on 27 September 2006:
“It must be noted that Moody’s sells their services to investors that are primarily interested in the securities markets. Do they have a vested interest in steering their clients toward securities rather than real estate?”
No, Moody’s would want to steer their clients toward markets which will earn them good to excellent returns. This report is basically saying those returns can be found in some housing markets, but not all - namely, not in the most frothy bubble markets the past 5 years.
Is that where you bought recently, Mr. Davis?
Comment by swansboro nc real estate on 27 September 2006:
Swansboro (Onslow county) recently had a revaluation and property taxes increased by 4 times in some cases. However, the market has slowed significantly (and started to reverse somewhat) and so the new values are based on old market numbers.