Are We Experiencing A New Real Estate Bubble?
Is the U.S. already experiencing a new real estate bubble?
Some analysts and commentators have been warning of a new US real estate crash since 2013.
So is it all happening again?
What really creates these cycles?
How do we know where we are in the cycles?
What are the best money moves to make now?
What Creates a Real Estate Bubble & Crash?
A crash is really defined by a decline in property values. This is typically due to high amounts of supply, lower demand, and limited ability for people to purchase.
These softer periods generally come when there is oversupply (new building and resales), higher interest rates, tougher lending criteria and limited access to credit, and lackluster economic times.
The real trouble comes when property owners can no longer afford to hold on to their properties. Various defaults begin to mount up, and then fuel the downward run with different types of distressed properties.
Where Are We Now?
Gary Keller, head of the largest brokerage in the world, Keller Williams recently turned more bearish on the market, and points to property prices being at new record highs as being something to watch out for. Some newspapers and agents are saying that we are already in a decline with more inventory online, affordability pushed to the limits, and in some markets signs of declining property sales.
What makes it difficult for the average real estate investor, real estate wholesaler, rehabber, and even most agents and firms to decipher where we are at any given moment is that
A. All real estate is local and
B. That most public statistics lag by several months.
So what is really happening in the real estate market right now may not be reported for another 3 months. By then it’s already history. In some cases those numbers are then again revised months or years later. This is why so many real estate investors, lenders and homeowners were caught in the last crash. And many officials, news pundits, and real estate agents don’t feel it is in their personal best interests to warn the public.
However, one of the biggest and truly most dangerous myths and misconceptions about real estate has become talk about cycles. Some trends do appear to be cyclical, but looking at the really big picture they are far more linear. Chart US home prices back to the founding of this country and you’ll find they are way higher today. They were still way higher in 2008. Property prices may dip again. They may even plummet by 70%. But at some point in the future they’ll also likely be 100% higher than they are today. Those at the top don’t want you to focus on that. They want you to sell cheap, and buy high. So that they make that profit. They may even kindly loan you the money to buy your home back after they foreclosed on it last time. Yet, the most successful and most famous financial giants have been those buying and holding long term or taking advantage of these opportunities.
Smart Investment Moves to Make Now
If you buy right, and sell right, it’s always a good time to be in real estate. You may need to adjust your strategy a little, or weight your investment options in one direction or the other a little, but there is always money to be made. In the long term real estate has proven to keep going up, so if you can buy and hold you’ll be fine. If you get the right level of discounts you can always flip properties. The vultures want you to panic. Don’t fall for it. Watch what they do, not what they say.
I”ll See you at the closing table,
Marcel Umphery the “R.E.I. Successmaker”