Why now is the right time to buy a home in Massachusetts: 40 years of proof

If we were back in 1985, and I were to tell you that in the upcoming 40 years there would be two horrific real estate and stock market crashes, two severe recessions, the 9/11 terrorist attack, that the United States would get bogged down in endless wars in the Middle East, that there would be a worldwide pandemic that kills millions and shuts down the world economy, and that over those 40 years, the US national debt would rise from $1.8 trillion to $34 trillion, there would be no way, in 1985, that you would invest in real estate or the stock market.

And yet, despite all that turmoil, loss, and grief, since 1985, US homeowners have reaped immense financial rewards by being long-term holders of real estate.

The resilience of Massachusetts real estate: A 40-year perspective

Over the last 40 years, homeownership in Massachusetts has likewise been a generator of enduring wealth for Bay State homeowners  Let’s review the history of the housing market in Massachusetts over the last 40 years. We’ll explore the ups and downs of the market cycle and see how, if you owned a home in Massachusetts throughout the last four decades, you’ve benefited greatly compared to being a long-term renter.

The late 1980s and early 1990s: A market in turmoil

A significant downturn in Massachusetts real estate occurred during the late1980s and early 1990s. The regional mini-computer industry collapsed, nearly plunging New England into an outright economic depression.

The Case-Shiller Home Price Index for Greater Boston fell 16% as many local lenders failed and the state experienced high foreclosure rates. These were scary times, and those who could afford to buy a home while prices were down were understandably hesitant.

However, those who bought in the early 1990s proved to be the winners. As the economy stabilized and the housing market recovered, home values began to rise again. This turbulent period underscores the importance of resilience and the rewards of holding onto real estate during market downturns.

The mid-1990s to late 1990s: recovery and growth

The mid to late 1990s saw a remarkable recovery in the Massachusetts housing market. By 1999, home values had not only recovered from the early 1990s downturn, but had also reached new all-time highs. This recovery surprised many experts. The Boston Globe Magazine famously cautioned against buying homes in Massachusetts in its 1995 real estate edition, predicting flat to little appreciation in the years ahead. How wrong they were!

Those who ignored the gloomy forecasts and bought homes in Massachusetts during this period saw significant gains. Even homeowners who had bought at the peak of the market in 1987 and endured the ensuing downturn benefited greatly in the long run. This period illustrates that long-term home ownership is the winning strategy, even if the market experiences short-term volatility.

The early 2000s: boom and bust . . . and boom, again

The early 2000s brought another boom in the Massachusetts real estate market. Home values soared, driven by a robust economy and favorable financing conditions. However, this boom was followed by a bust during the financial panic of 2007 and the national Great Recession that followed. The real estate market plummeted, and the economy suffered greatly.

Many prospective buyers in 2012 were leery, thinking the market was too low to invest. Yet, for those who could afford to buy, 2012 proved to be the low point of home prices in Massachusetts.

2012 – 2014 was a golden opportunity for buyers, as home values began to recover and eventually reached new highs by 2016. The lesson here is clear: even in the face of economic downturns, the real estate market has always bounced back and provided substantial returns for long-term investors.

The resilience of the Massachusetts market

The history of the Massachusetts real estate market over the last four decades shows a pattern of decline, recovery and further ascent. Despite significant downturns and economic challenges, home values have consistently recovered and reached new heights.

This resilience is evident in the Massachusetts real estate market’s spectacular performance during and after the COVID-19 pandemic, despite rising mortgage rates.

Is now a good time to buy real estate in Massachusetts?

Given the current high home prices in Massachusetts, many prospective buyers may wonder if now is a good time to buy real estate in the Bay State. While no one can predict the future with certainty, the lessons of the past clearly tell us that long-term home ownership is the best investment strategy. Attempting to time the market is a fool’s venture. If you can get the financing you need to buy a home, go ahead and buy now!  Focusing on the long-term potential of real estate investment will provide substantial financial rewards.

The role of inflation in real estate investment

One critical factor to consider when investing in real estate is inflation. Owning real assets, such as real estate, will protect your purchasing power from the erosive effects of inflation. At the Federal Reserve’s target of 2% annual inflation, even uncompounded, there will be a 20% erosion in your buying power over ten years. Real estate, as a tangible asset, appreciates over time, helping to safeguard your buying power against inflation.

The long-term benefits of home ownership

Despite the inevitable market fluctuations and economic uncertainties, owning your own home remains one of the best paths to financial success. Yes, home prices will fall at some point in the future. However, history shows that home values will also recover and continue to rise over the long run. Long-term home ownership allows you to benefit from this appreciation, building equity and wealth over time.

If you’re considering buying a home in Massachusetts, remember the lessons of the past. Don’t attempt to time the market, buy real estate as soon as you are able. Invest in the long-term potential of real estate investment. Owning your own home is the crucial first step on your road to financial success.

I’m Warren Reynolds with Berkshire Hathaway HomeServices Commonwealth. If you’d like to discuss your own road to financial success in real estate, use the form below to contact me or give me a call at 508-561-6259. Let’s navigate this journey together and unlock the potential of long-term home ownership in Massachusetts!