Real Estate Market Ebb & Flow

April 23, 2008

Real Estate values have traditionally doubled every 10 years or so.  This has been the case for many decades.  But with every change in the market, there are those who say the end is near. As I often tell people, get your eyes off your feet and look ahead down the road. Real Estate has and always will be a long-term investment.  If you were looking to buy and sell in 6 months, I would advise you to stay put.  However, that is not why you buy. Whatever happens in the next few months should not dictate a person’s decision regarding their next home. 


Three weeks ago The National Association of Realtors stated that they expect the national market will decline by an estimated 1.2% in 2008.  1.2%!  If this is not defining the bottom of the market or the near bottom I don’t what is.  Bear in mind, this is averaging the top metro areas like Charlotte, North Carolina and Portland, Oregon with the likes of Miami, Florida, Las Vegas, Nevada and Detroit, Michigan.   So, if the worst they are predicting is 1.2% percent, I think that’s a pretty good indicator of how these top markets are going to perform this year.


On a $300,000 sales price today, 1.2% is only a “possible” decline in value of $3600!  Is it really worth missing out on the buying opportunities today over $3600?  Not to mention that the interest rates have increased 1 full percent since the 3rd week of January, this year, to about 6.25%.  That alone should be getting the attention of prospective buyers.  That same house with a 90% LTV (Loan To Value) mortgage at today’s 6.25% interest rate would have a Principal & Interest (PI) payment of $1662.  If it were purchased back in January at 5.25% with the same purchase price and loan amount, the PI payment would be about $1491.  So, not buying that home over just the last 10 weeks would have cost you $171 a month or $2,052 a year.  I don’t need to do the exercise of what the same house would cost with a 1.2% drop in value and another .05% increase in rate.  I think you get the picture. The point is that if you wait to feel out this market, home prices could steady and sellers might become less willing to negotiate. 


Portland Monthly Magazine just published a great story about the local real estate market that vindicated a lot of what I’ve been saying.  They stated that, “Portland hasn’t seen a decline in real estate values since the mid-80’s and our average annual increase is typically under 10 percent.  As a result, even if our market does stumble, we won’t have nearly as far to fall as a place like California, where double-digit annual price increases have been replaced by similar decreases.”


Suffice it to say, our local market is fairly steady and any dips are far below those of the national average. Not to mention, it’s become a buyer’s market once again, which, if you looked at a graph, would be right in line with how the market works. If you’re looking at real estate as a long-term investment, don’t delay. There are excellent opportunities out there right now.

One Response to “Real Estate Market Ebb & Flow”

  1. Excellent points all! I try and tell my clients these exact same things. In fact I will make sure my clients read this post!

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