The Informed Investor's Resource

 

Real Estate Cycles and Trends

©2009 Bob Sharpe
C.E.O., RealEstateWinners.com

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real estate investingReal 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, 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 falling.

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 years.

Real Estate Trends

real estate pricesTrends 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) 676-3127.

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.

real estate cycleNegative Economic Trend Influencers

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 business.

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.

Remember:
The Cycles tell you when to buy
The Trends tell you where to buy
 

 

 

The  
$1,000,000
Strategy

  1. Buy your own house. 
  2. Purchase an investment house.
  3. Buy several more investment properties as you are able.
  4. After about 10 years sell your houses and purchase an apartment complex.

Where to Find the Money to Invest

  1. Your savings account.
  2. Your home equity.
  3. Cut back on unnecessary expenditures and save the money.  Use the Calculators.
  4. Start a part-time home business.
  5. Upgrade your IRA to purchase Real Estate.