B of A CEO Says Homes No Longer Assets

Bank of America Corp Chief Executive Officer Brian Moynihan is warning Americans against viewing their homes as long-term investments and urging them to instead view a home as a great place to live. As you continue to read this article think about what B of A’s CEO has said and then in the end I will offer a counter point to this argument.

A Home is Not an Asset

“It’s sobering to think, but some people shouldn’t be thinking of (their home) as an asset,” Moynihan said at the 2011 National Association of Attorneys General conference. “They should be thinking of it as a great place to live.”
Moynihan noted an Ohio customers’ complaint that his 100-year-old home was valued at $50,000. The home, Moynihan said, would be valued as “some multiples of that figure” if it were located elsewhere, but stagnant population levels in the state are driving demand and home prices lower.

The reality is that while Moynihan is just now figuring out that a home should be viewed as a great place to live, not simply an asset; many homeowners have always viewed residential real estate in this manner. First and foremost a house is a home. But at the same time, homeowners must be (and have always been) aware of their home’s value in the short-term and in the long-term. No one wants to purchase a home that will decline in value over the long-term, while their mortgage payment remains consistent. That’s just natural.

That said, Moynihan makes a good point about location. Investors interested in foreclosures, REO or even purchasing homes from the retail market need to consider the viability of the community in which they are purchasing. Is the community’s population aging? Are the schools of high quality? Is there a low-crime rate? How invested in the community are the residents? These are the factors which will impact the long-term value of a home and which potential buyers need to seriously consider before they buy.

Counter Point – A Home is an Asset

Really, what else would you expect the CEO of B of A to say, as the nation’s largest bank; they have a disproportionate share of foreclosures in the market.  While here in Washington we have seen price declines of over 30%, some parts of the nation have experienced greater than 60%.  So this is basically saying well you have to live somewhere so might as well tough it out in a home you own.  Also, he basically is using this to skirt the massive amount of foreclosures and lack of loan mods completed issues.

Historically many American have created a good retirement based on paying off their home and this becoming one of their single largest assets.  This is of course over the long term.

If you don’t own a home your rent will always keep increasing and when you rent you are missing out on the tax benefits of owning a home.

Even though prices are still declining in Washington State, I feel that now is the time to invest in real estate.

Why Invest in Real Estate You Ask?

1. Interest Rates are at a 45 year low meaning low monthly payments.
2. Locally, Rents have begun to catch up with mortgages.  This is the first time in 15 years we started to approach this threshold in Snohomish County.
3. You will never time and find the bottom exactly, so the next best thing to do is purchase near the bottom.
4. High levels inventory creates a lot of options to choose from.
5. Motivated sellers because of foreclosures, the economy, short sales, etc. are creating literal steals on some homes.
6. Now is the time to Buy Real Estate.  You always want to be slightly ahead of the trend.  Because by the time the general population starts to do it the deals are gone.

Please leave your thoughts in the comments and contact us if there is anything we can do to help you.