Are Real Estate Markets Better When Prices Go Up or When Prices Go Down?
January 17th, 2008 Categories: Real Estate Market Trends
Is it better to buy a home when prices are increasing? How about when home prices are falling? Most people have to sell a house to buy another. Stop worrying, think long term, and get on with your plans.
I just read an article over at cnnmoney.com about how based on December data, national housing starts and building permits had their sharpest drop in 27 years. Sometimes you just can’t win.
Remember a few years ago when real estate markets in some parts of the country were increasing by double digit percentages? The traditional media lamented over how the average person was being shut out of opportunities for home ownership.
The problem then was too little supply (think housing starts and building permits) and too much demand. Simple economics drove the price of homes in markets like Southern California, Florida, DC Metro, and many parts of the Northeast through the roof.
Now that demand has dropped off, and builders and developers are reacting by reducing inventory (supply), the traditional media is at it again. Now the problem seems to be falling home prices are threatening the national economy somehow.
Why is everything in the real estate business always a disaster for these people? Prices go up, it’s a disaster. Prices go down, it’s a disaster. What if there was perfect equilibrium? Would that make the traditional media pundits happy?
I think the moral of this story is don’t think about real estate markets nationally and don’t look at them for month-to-month trends. If you buy residential real estate almost anywhere in the county, and hold it for 5-7 years (as most people do), you will make a profit when you sell.
The economically sound appreciation rates for residential real estate are about 3-5% per year. Interestingly enough, that is exactly what the local Raleigh real estate market tends to deliver. Year after year investors and homeowners alike can pretty much depend on this trend for homes in the Raleigh area.
Ready to buy a home, or invest in real estate, in a very stable and reliable market? Click here to search homes for sale in Raleigh.
