The real estate market is a cyclical beast. Over and over, it repeats the same patterns. If you understand the patterns, you can really make a killing in real estate. As I write this article, the cycle of the real estate market is about to put buyers in a very, very good position.
The real estate market has historically shown steady gains over time. Depending on the part or the country, it has returned six percent or so each year since measurements began. This figure is misleading. It represents an average over 100 years or so, not phases of time. A closer look at the figures of the last fifty years or so reveals an entirely different picture.
The real estate market swings wildly. For five to ten years, the market will be stable and moderate. Suddenly, the market will heat up for two to five years and prices will skyrocket. Sound familiar? This phase is followed by a drop in prices and huge buying opportunities. This is the point where we find ourselves.
After a big run up on real estate prices, there is always a sharp pull back. Many real estate gurus are suggesting we will see a soft pull back now, but they are wrong. We simply have not moved far enough from the recent sellers? market to see the sharp drop in home prices. It is coming and you, as a buyer, are going to make out like a bandit.
To understand how big an opportunity is about to occur, let us return to 1988. Following a run up in real estate prices, the home market staggered and fell to its knees. Why? People were overextended on debt. Lenders had given money to just about anyone breathing. Sound familiar? When the market fell, home values plummeted. An old friend actually purchased a home in Hollywood Hills for $350,000. Three years earlier, the home had been sold for 1.2 million dollars. As you might imagine, this turned out to be a rather nice deal for him. The home sold in 2004 for 1.8 million dollars.
As we turn away from the recent sellers? market, now is the time to hoard your money and watch your local real estate market. All those people with adjustable rate, interest only and balloon mortgages are in for an ugly surprise. The market is going to be flooded with homes that need to be sold and sold now. This will drive prices down dramatically. That, of course, is when you buy.
If you are a patient buyer, you stand an excellent chance of making an absolute killing in the real estate market over the next few years. You will be able to buy low and then sell high when the market recovers.
