It used to be that common wisdom declared that buying homes was likely the most trustworthy investment you might make. "A home will always go up in worth" was the common wisdom you heard from buddies and family, and even property investors.
You were told that you should generally buy instead of hire a home. Why pay someone else's mortgage when for a similar money you can own your very own home and have an excellent investment?
Again, that was the common knowledge everybody assumed.
Then came the housing collapse of 2007 when many people lost out and housing values plummeted. This frightened many people out of the housing market... And the "common wisdom" did not sound so wise any more.
But what is the truth?
The truth is housing costs and the real estate market has always been cyclical. Prices went up and on occasion went down. Of course, the long term trend was always up. Even though the costs frequently went up slowly, you could count on them to always go up at some point. This is the way in which it was for over eighty years since the Great Depression.
But yes this housing bust was significantly different. Between 2000 and 2007 home costs went up more than any other time in the last fourty years. And between 2007 and 2009 they went down faster than at any other time in that fourty years. It had been a great example of a booming market going broke. The housing bubble had burst.
Ya hindsight is always twenty-twenty. If you look at the housing market over time like on this website, it virtually seems obvious that something was wrong. There was no good reason for prices going up that much, that quickly. There should have been stop signs every where.
But no. Everybody thought it would last for all eternity. That encompassed not only real estate investors and householders, but also lenders and banks and even Wall Street investors.
People who had never owned a property were encouraged to get into the market by lenders who were underhand. Many bought houses they really could not afford. Many ended up with loans they couldn't pay when their home values took a nose dive.
And yes, there doubtless was enough greediness to go around for everybody.
But now the housing market has stabilised (some people would say crashed) it's OK to take a big picture view of the situation from 10,000 feet again. If you look at those housing prices over the last 40 years, the present costs are inline with long term trends. In fact , you might even believe that housing prices are very low. And combined with awfully low mortgage rates, the common knowledge may again be that real estate is a sound speculation.
For those with money to invest there may never be housing costs this low again.
And for first time householders with a little money for a down payment, this is a superb time to get a great deal on a great long-term investment.
And with the foreclosure crisis, you can find short sales in numerous places around the country.
Yes it's safe to go into the water. And although it could be one or two years before prices start going up again, you can bet on the proven fact that they should. After all , that's what they have been doing for years.
Now if we could just get past this foreclosure crisis. But that's a story for another time.
You were told that you should generally buy instead of hire a home. Why pay someone else's mortgage when for a similar money you can own your very own home and have an excellent investment?
Again, that was the common knowledge everybody assumed.
Then came the housing collapse of 2007 when many people lost out and housing values plummeted. This frightened many people out of the housing market... And the "common wisdom" did not sound so wise any more.
But what is the truth?
The truth is housing costs and the real estate market has always been cyclical. Prices went up and on occasion went down. Of course, the long term trend was always up. Even though the costs frequently went up slowly, you could count on them to always go up at some point. This is the way in which it was for over eighty years since the Great Depression.
But yes this housing bust was significantly different. Between 2000 and 2007 home costs went up more than any other time in the last fourty years. And between 2007 and 2009 they went down faster than at any other time in that fourty years. It had been a great example of a booming market going broke. The housing bubble had burst.
Ya hindsight is always twenty-twenty. If you look at the housing market over time like on this website, it virtually seems obvious that something was wrong. There was no good reason for prices going up that much, that quickly. There should have been stop signs every where.
But no. Everybody thought it would last for all eternity. That encompassed not only real estate investors and householders, but also lenders and banks and even Wall Street investors.
People who had never owned a property were encouraged to get into the market by lenders who were underhand. Many bought houses they really could not afford. Many ended up with loans they couldn't pay when their home values took a nose dive.
And yes, there doubtless was enough greediness to go around for everybody.
But now the housing market has stabilised (some people would say crashed) it's OK to take a big picture view of the situation from 10,000 feet again. If you look at those housing prices over the last 40 years, the present costs are inline with long term trends. In fact , you might even believe that housing prices are very low. And combined with awfully low mortgage rates, the common knowledge may again be that real estate is a sound speculation.
For those with money to invest there may never be housing costs this low again.
And for first time householders with a little money for a down payment, this is a superb time to get a great deal on a great long-term investment.
And with the foreclosure crisis, you can find short sales in numerous places around the country.
Yes it's safe to go into the water. And although it could be one or two years before prices start going up again, you can bet on the proven fact that they should. After all , that's what they have been doing for years.
Now if we could just get past this foreclosure crisis. But that's a story for another time.
About the Author:
Rick Hart is an online business expert. He provides tools for short sale attorneys in Tampa that help with loan modifications, short sales negotiations and repos.
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