Monday, January 10, 2011

Housing Crisis or Opportunity?

Only History Will Tell
Historically, Real Estate Has Been a Solid, Long Term Investment

Looking at the last 40 years of real estate in California, we have seen very few times in which real estate values have dropped. In fact, according to the California Association of Realtors®, since 1970 the real estate market in California has only dropped seven times, six times under 3.7% and only once at 4.5%. On the contrary, our market has seen remarkable growth. In 1970 the median cost of a single-family home in California was $26,000. Today, 37 years later, homes have seen a 2,165% increase, now selling for $588,970.

Recent Years Have Shown Even Stronger Success According to the California Association of Realtors®, in 1990 the median price of a single family home in California was $194,952. Today, just 17 years later, that same single family home is selling for $588,970 – a 202% increase. Certainly in recent months we have seen a shift from a seller’s market to a buyer’s market, but that switch was necessary to continue a healthy flow of exchange amongst buyers and sellers. The bottom line is that our economy couldn’t maintain the double-digit increases we saw in home prices in 2003 and 2004 without seeing a shift. If we continued to see an upstream of that magnitude, we would nearly eliminate the first-time homebuyers which could potentially drastically hinder our economy. Shifts in our market are what keep our economy running smoothly.

Is Now the Time to Buy? Now may be the time to buy. Mortgage rates remain low (certainly by historical standards), prices have stabilized and there is a large selection of homes to choose from. Certainly it makes a more exciting news story for journalists to dwell on the negative, but for smart consumers, it is definitely more economically advantageous to seize opportunities as they present themselves. And this market may offer some tremendous opportunities. While no one can predict the future, if history is any indication, then real estate over the long run will continue to be a solid investment. And that’s good news for everyone – buyers, sellers and the real estate industry.

Graph: Median Median Home Price of Existing Detached Homes, California - 1990-July 07 - Source: California Association of Realtors.

For Buying or Selling, You Need a Teacher that gives you straight answers. For more information on buying, selling, or renting out an income property in San Diego, please call Frank Rashid's cell phone at (858) 676-5250 or email him at More to follow within the next couple of weeks.

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