Charleston area homes, Buyers Broker, BuyersAgent, Josephine Traina Gleason

A History Lesson

"The

Only Thing We Have To Fear, is Fear Itself"
part 2

A history lesson on real estate cycles...

About every ten to twelve years, as an average, real estate values tend to double in most major metropolitan areas. For example, in the 1920s, the original colonial homes sold for just under $2,500 in Long Island, New York.

Since then, real estate prices have doubled almost eight times over the last 80 years. That averages out to a 100% increase approximately every ten years. An interesting note is that about every ten to twelve years, real estate values must correct before they enter their next "doubling cycle."

It's not a matter of if; it's a matter of when

The evolutionary process is three steps forward and one step backwards. For example, imagine a 100% increase occurring in three steps of one-third parts each.

The last market cycle of the 1980s was one in which real estate values doubled, followed by a correction of the early 1990s, which equated to a 20% to 30% decrease over a three to five year period.

This cycle was then followed by the post-millennium cycle boom of 100% from the last high point of the previous cycle. We are now in the naturally-occurring phase of a correction in the cycle. This essential and beneficial adjustment gives the market pause to reflect and gather momentum and strength for the next doubling cycle.

This has occurred time and time again because the long-term demand for housing is growing an exponential rate based on population growth to almost double in the United States by 2050. This will continue to drive prices higher as it has for the last 100 years.

Since we now know based on history that nearly all real estate prices will double again, it's not a matter of if, it's a matter of when your existing houses will sell.

Sharing these facts with your prospective buyers will put them in the right frame of mind to buy now versus next year if they plan on staying in the home more than five years.

If a buyer is apprehensive about being the right time to buy, ask him if he'd like to buy his parent's home for the price they paid for it--the answer will be obviously "yes."

If it bleeds, it leads

There's an old expression in the media business, "If it bleeds, it leads." In other words, the media loves to cover negative news more than positive because it sells better. When the real estate market is in turmoil, the media loves to run these negative headlines to keep reminding people how bad things are.

When buyers hear the bad news, it affects demand because the negative news drives fear, which makes buyers worry about whether the time is right to buy a home.

Is the media simply reporting the news or does the media actually affect the news in this regard? The answer is obviously both. The media reporting negative news alone can't shape a real estate market. However, since perception is often reality, when buyers are spooked, they may shy away from buying.

This affects lenders, builders, real estate agents, and other professionals who rely on the real estate business for their income. It becomes almost a self-fulfilling prophecy because things get worse, and the media again reminds us how bad things are.

But, are things really as bad as the media reports? At the time of this article, the numbers certainly do reflect falling home prices and rising foreclosures.

When you hear that foreclosures have doubled or even tripled in a particular area, this may sound catastrophic at first until you realize that the vast majority of homes (97% to 99%, depending on the local market) are NOT in foreclosure.

Despite the doom and gloom, there's always a buyer for a well-kept home offered at the right price and terms. In short, don't read the paper if you want to keep a positive attitude and sell your homes fast!

Posted By - JosephineTrainaGleason - 05/26/2009

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