Real Estate Cycles and Trends
©2009 Bob Sharpe
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Real Estate prices are never static. They go up
and down in predictable cycles. The cycles are directed by
long-term trends. Knowing about cycles and trends can help
you profit greatly from real estate investments.
It's not just
location, location, location.
It's also timing, timing,
Real Estate Cycles
Recently real estate prices have been going down in most
parts of the US. Even though they've gone down a lot, most
houses are still higher than they were 10 years ago. Many homes
are still worth double their 1999 value. And they are likely to
double in value again 10 years from now. That is why Real
Estate continues to be the investment of choice with the people
who are making the most on their investments.
All markets go through cycles.
Some markets, such as California and South Florida, have had
large swings in value. In the early 2000's home prices
overinflated, causing a bubble. Then the bubble burst, sending
prices on a steep tumble. It happens because houses sometimes
become greatly overpriced in the frenzy of the market, and the
price correction comes hard. It's possible to make a lot of
money in short time if you buy at the right time, and you sell
at the right time. It's also possible to lose money if you buy
near the peak and then you sell in a panic when prices start
Other markets, such as parts of Texas and Tennessee, have
had much smaller fluctuations. The upward cycles are slower,
and the downward cycles can be barely noticeable. The profit
potential isn't as great, but the risk is minimal. The cash
flow is usually better, also.
Cycles generally last about 10 years.
In good real estate markets,
it is very common for home prices to double every 10
Real Estate Trends
Trends are long-term. A trend can be 25, 50 or
even 100 years. Trends have to do with the perceived
desirability of an area. Two major factors that influence
trends are economic and lifestyle.
At RealEstateWinners.com we can help you find ideal
investment properties in the best uptrend markets in the US and
Costa Rica. You can reach Bob Sharpe at (626)
Positive Real Estate Trends
Most metropolitan areas in the US are in long-term uptrends.
True, the prices are down in 2009, because we are near the
bottom of a real estate cycle. If we do not enter a deep
depression like the Great Depression of the 1930's, however,
most house prices in the uptrend areas will double in 10 years.
If we go into a deep depression, it could take 15-20 years.
Uptrend markets are generally the markets where there is a
steady flow of people moving in. Most of the people moving in
do so because of available jobs. Job growth occurs in markets
where taxation is low, State and local governments are
business-friendly and unionization is minimal.
Two other factors that fuel market uptrends are recreation
and retirement. Recreational areas attract buyers of second
homes, and areas where people like to retire trend upward
because of the influx of retirees, which in turn attracts
employers and jobs.
The Law of Supply and Demand takes over. Where the demand
for homes increases, the home prices follow suit.
Negative Economic Trend
Real estate markets that are permanently losing jobs
generally see a long-term drop in property values. High
corporate taxes and heavy unionization make it more difficult
for businesses to operate profitably. Many business in these
area relocate, send jobs overseas or simply go out of
A prime example of a city caught in a serious downward trend
is Detroit, where a recent survey of the MLS found 227 houses
listed for under $1,000! One fire-damaged home was listed on
the MLS for $50. No, I didn't forget a few zeros. The house was
listed for fifty bucks!
Is it possible to make money in a downtrend market? Yes, but
it's difficult. If you are not an experienced investor with a
fool-proof short-term exit strategy, stay away from downtrend
markets. Even with the best of exit strategies, investing in a
downtrend market can be very risky.
Beware of the Downtrend Market Trap
Investors sometimes buy investment property in
downtrend markets because they can buy at incredibly low
prices. with the promise of great cash flow. It looks
tempting, and sellers of these properties promise big rental
profits. The problem is that as housing demand diminishes
in these markets, the houses get harder and harder to rent, and
they can be difficult to sell - even when selling at a loss.
It's the Law of Supply and Demand.
What You Can Learn from Real Estate Cycles and Trends
You make the most money when you buy properties at the
bottom of the cycle. 2009 is a once-in-a-lifetime opportunity
because interest rates are also at historic lows.
You have the least risk when you invest in uptrend markets
where home prices are affordable where rents are high enough -
in proportion to home prices - to create cash flow.
Cycles tell you when to buy
The Trends tell you where to