Peter Schnitzler, The IBJ

pschnitzler@ibj.com

Despite the national housing market's slump, more than three-quarters of U.S. homebuyers remain confident their purchase was at least as good an investment as stocks. That's according to a new survey released today by the Metropolitan Indianapolis Board of Realtors.

"Real estate is a long-term investment. Don't buy and expect to make a fortune in six months," said Century 21 Scheetz Realtor John Creamer, a former MIBOR president. "But if you're looking for long-term wealth accumulation, real estate in central Indiana is still a great place to invest, either in a home or a rental property."

The Chicago-based National Association of Realtors researches homebuyer confidence every year and releases results in its "Profile of Home Buyers and Sellers" report. In 2007, NAR mailed an eight-page survey to 150,000 people who bought homes between June 2006 and June 2007.

The survey found two distinct sets of homebuyers: one group is motivated primarily by utility, or the desire to dwell in and enjoy a house as it appreciates. The second group buys homes purely as an investment vehicle, hoping to gain rent income. Taken together, three quarters of both groups compared their home purchases favorably against stock investments.

The central Indiana picture may be even brighter. Creamer said NAR studies the Indianapolis market in detail every other year. It's slated to research Indianapolis again this summer.

In some hot U.S. housing markets, such as Florida and California, the housing bubble inflated home appreciation rates as high as 12 percent annually in recent years. Now those markets are seeing the reverse trend.

Hoosiers never saw those kinds of spectacular housing gains. But Creamer noted that real estate in central Indiana has always been more stable. It historically appreciates at about three percent annually. The upside is it will likely continue on that pace.

"[Local] sales have been up and down. But buyers are still showing up at open houses and asking questions," Creamer said. "We're still writing offers and still seeing sold signs.

"We never went through the ceiling, because we never had investors buying just to get appreciation," he added. "Our investors were a little more savvy."

Although the results of NAR's survey are a bit dated at over six months old, Ball State Bureau of Business Research Director Michael Hicks said they're probably still valid. He said the housing market has been slowing for about 14 months. But home purchases remain a long-term decision.

And despite the short-term downturn, over the 30-year length of a mortgage, the factors that make home investments attractive remain steady. They include the Federal tax deduction for mortgage interest and population growth, which stimulates demand for housing demand.

Indiana's property tax problems likely contributed to slower local real estate sales last year. But Hicks said property tax caps approved by the Legislature this year likely will be a real estate stimulus in the weeks to come thanks to the predictability they provide.

When considered purely as an investment vehicle, Hicks said, homes don't necessarily compare favorably against stocks. Over the last 40 years, he said, stocks have grown on average 10 to 15 percent a year - far higher than Hoosier homeowners have ever seen their appreciation rates climb.

But individuals can't live inside a stock, or enjoy the intangible benefits of a well-appointed kitchen, cedar deck or recreation room. Taking all factors into consideration, he said, a house is a good long-term investment.

"I'm not sure they are if you're [just] speculating on it, but they are if you're living in it," Hicks said. "Or at least I hope so, because I'm writing a fairly big mortgage payment every month."