I hope this article gets you off the couch and on the phone to your real estate agent immediately.
It’s time to buy real estate.
I have written over 400 real estate and finance articles in the last quarter century, but rarely one with a call to action such as this. Why am I so adamant now?
Because it’s time to buy real estate. The market is ready to rumble. An opportunity this timely will not last for very long, and may not return for 15 years or more. We’ve seen this before.
If I’m wrong, I’ll eat my hat.
Most real estate stories are like fish stories — about “the one that got away.” My favorite story is about a world famous hot springs resort near Murietta. Once appraised in the tens of millions of dollars, the entire property could have been bought in 1992 for a mere $950,000 in back taxes. Twenty years ago, that one got away.
Why is it time to buy real estate?
Because if you don’t buy now, you may be priced out of the market within a few short years. You will regret it, as Bogey says to Bergman in Casablanca, “maybe not today and maybe not tomorrow, but soon, and for the rest of your life.”
The last 44 years have seen three major growth cycles in local real estate. Between 1968 and 1982, San Clemente homes appreciated an average 12 percent per year. Between 1985 and 1989, the annual rate was 16 percent. Between 1995 and 2006, the rate was 15 percent per year. The average length of these three growth periods was ten years.
To be sure, after each of these extended real estate bull markets, there were relatively short “correction” periods. This is the cyclical nature of most investment markets, whether real estate, stocks or chinchilla farms. But each “boom and bust” local real estate cycle ended with prices considerably higher than when the cycle began.
Between 1982 and 1985, the market was flat. Between 1989 and 1995, the market had a 30 percent total correction. Between 2007 and 2011, the market had a 35 percent total correction. The average length of these three corrections was under five years.
Market corrections can be catastrophic, especially if undercapitalized or over-leveraged. Like everyone else, I have lost equity in market downturns. No guts, no glory. No guarantees.
But it’s time to buy real estate, because the latest correction is over.
If I’m wrong, I’ll shave my beard again.
After a five-year correction, San Clemente’s 2012 housing market came out of the gate screaming. Since January, the home median price has jumped more than 10 percent, without a single monthly drop.
To repeat, the recent five-year market correction is over — and WAS over last December. You have already lost ten months of the next bull market. You’re not still on the couch, are you?
How strong will the next bull market be? One word should describe it: Inflation.
With the national debt approaching $16 bazillion or so, the next big thing that’s going to happen to this economy is inflation. Inflation drove up prices in the 1970s so high that it crippled those without inflationary assets. But those with real estate holdings came out well ahead by the end of the decade.
Inflation is bad only for those on fixed incomes or without assets that rise with inflation.
Inflation must hit us eventually, no matter who runs the government. It’s unavoidable.
Assuming real estate prices appreciate at 10 percent per year for the next 10 years — history shows this is not only possible but probable — San Clemente’s home median price will rise from about $600,000 to over $1,600,000.
A new bull real estate market is not only an opportunity to play offense — to buy low and become rich. Just as important, it’s an opportunity to play defense — to weather the inflationary teens as some of our parents weathered the inflationary seventies.
And another thing: The local real estate for sale inventory has not been this low in years. But don’t let the “slim pickins” stop you from making an offer. Prices won’t be this low ever again. Buy something.
Because it’s time to buy real estate. Don’t say I didn’t tell you.
If I’m wrong, I’ll shave my head again.
For more about the San Clemente real estate picture, check out Mike’s latest San Clemente market trends at mcotter.com.