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Welcome to an article I just read by The Balance…in it, they say:
A survey found that 58% of people felt like there would be a housing correction by 2020, and as a result, 83% feel like it would be a good time to sell.
Then article goes further to explain that:
“National median family home prices are 32% higher than inflation, similar to 2005, when they were 35% overvalued.”
And…yes…even more spooky statistics…”52% of home loans are now originated by lenders who aren’t regulated as banks.”
However, after reading through all of their data… there should really be a few main takeaways in terms of when and how the real estate market will drop…and how you can make sure you come out of it PROFITABLE:
First, it’s REALLY important to understand that when it comes to real estate, it is entirely about LOCATION, LOCATION, LOCATION.
It is IMPOSSIBLE to say that the ENTIRE real estate market will drop at the same time…that’s like saying ALL stocks will come drop down, without recognizing that some stocks may end up doing incredibly well. Real Estate is the exact same way. Real estate prices are heavily influenced by specific market conditions of demand, proximity to employment, and current supply of inventory…this will vary DRAMATICALLY from Location to Location.
Second, in terms of housing PRICES themselves – it’s important to distinguish that MANY real estate markets STILL have not recovered from their previous all time highs once you account for inflation.
https://seekingalpha.com/article/4097882-definitely-housing-bubble
Prices just naturally rise over time, and as markets continue to develop, we’re going to constantly be reaching all time highs…that doesn’t mean it’s necessarily over valued. Same applies to the stock market, we’re going to naturally continue hitting all time highs…and that isn’t a reason NOT to buy a home. It’s just a normal cycle where prices will continually get more expensive over time.
Third, a MAJOR point the article missed is that for most people, the value of their home isn’t going to really make much of a difference in the short term:
For EVERYONE who’s buying a home with the intention to live in it for 10 years or more, then price it’s worth within the next few years makes absolutely no difference whatsoever, when you aren’t selling. I think that’s the most difficult part for people to understand, because EVERYONE thinks to themselves: I want to wait for prices to drop first, THEN I can buy something!!
Instead, anytime you’re buying real estate, the #1 thing you can do is buy with the intention of holding it long term.
Secondly, and this is common sense, but you’d be surprised…only buy something that you can comfortably afford on a fixed payment.
Third, do your best to buy a property under market value.
And fourth…if you’re buying something as an INVESTMENT where you plan to make money from it…CASHFLOW IS KING, not necessarily the value of the property in relation to what you paid.
For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness@gmail.com