Trulia economist gets asked great questions on Reddit
Jed Kolko, Trulia’s (TRLA) chief economist, conducted an “Ask Me Anything” session on Reddit.com on Friday. Kolko answered questions ranging from the outlook of the national home market to whether buying a home is even a sound investment anymore.
Here are some of best answers:
Is buying a house a sound investment?
Kolko: “When you look over the really long term, housing has tended to be roughly similar to stocks/equities. And housing has never actually been a totally safe investment. Even though the recent housing bubble and bust were severe, there have been lots of localized home-price drops over the decades.
“Coming out of this housing crash, the big change is that people now realize housing is not a risk-free investment. Hopefully we’ll all remember that home prices sometimes do go down, and it’s important to factor in that risk when deciding whether to buy.”
Is it better to buy or build your home?
Kolko: “Great question, but there’s no one right answer.
“Building a new home (or buying one that’s under construction) lets you customize features yourself, and its often easier to build in certain features (Ethernet wiring, radiant heat, etc.) from the start than tearing up an existing home to add them.
“However, new homes are typically more expensive to buy than existing homes. Also, some people prefer older, more established neighborhoods, where new homes are rarer.
“Finally, if you’re thinking about being your own developer and overseeing the construction of a new home yourself, that could give you lots of control over every feature — but development could be a full-time job. Only do that if you really love the process.”
Is the housing bubble about to burst again?
Kolko: “Our research shows that home prices still look 5% undervalued nationally. Even though prices have jumped in the last 2 years, they’re still in rebound mode after the huge price declines of the housing bust.
‘Even though I don’t think we’re in a bubble nationally, homebuying is getting more expensive. Prices are rising around 10% year-over-year, and mortgage rates are rising. So it will probably be more expensive to buy a home a year from now than it is today, but lots of people don’t have the down payment or can’t get a mortgage today.”