IS NOW THE TIME FOR REAL ESTATE??
Residential real estate prices are cyclical – through wars, financial institution crises, terror attacks, Presidential impeachments, recessions and other calamities. And through it all, it has returned to and then increased over its old high water marks. U.S. real estate values have been going up steadily for nearly 40 years -- an average of 6.3% a year since 1968, which is when the National Association of Realtors first started keeping track.
This performance rivals any other form of investment such as the S&P 500, a major stock-market indicator that has had no less than a dozen down years in the same period -- or the market for U.S. Treasury bonds, which has fallen in 17 of the last 55 years over the last 40 years.
Today’s headlines of gloom and doom are the announcements of great opportunities. And there is no announcement when things have changed. Like most things, when the press discovers them, the tide has already started to swing in the opposite direction.
Residential real estate enjoys a position of importance no other investment can equal. Problems? Uncle Sam to the rescue. Capital gains? Get rid of them. Financing problems? Get the Federal Reserve involved. Affordability? Lower rates and extend mortgages. Is Housing important? Absolutely. Is there another investment that has the same favorable treatment? NO.
When was the last time Congress decided to find ways to save warehouses or office buildings or apartments??
Southern California has performed better than the national averages and market values will continue to be influenced by:
- Lack of land for development
- Significant Job Creation – High Wage Categories
- In-migration at higher end of market
- Baby Boomers Seeking 2nd Homes
- Population growth at lower end of market
- Continued favorable tax benefits to homeowners
- Favorable capital gains implications
- Abundance of and new heretofore unseen flexible financing programs
- Continued upward mobility in home ownership
California population will increase by 33% over 15 years – San Diego’s population increase will match that of the state with 73,000 residents per year that need shelter.
Real estate prices peaked in 2005 and typically flatten before rising again. Recoveries are rarely news -1977, 1985, 1994, 2001. In 1975 a condominium in Del Mar, California was $78,500. In 1978 it became “over-priced” at $135,000 and was sold. Today, the 1,900 square foot condominium fetches over $1 million. Is it over-priced?
Sure. It always is.
Population Growth plus job growth plus inflation will affect California and San Diego real estate prices. A massive transfer of wealth over the next 20 years from baby boomers will be funneled into real estate because of the exceptional ownership advantages versus other investments – stocks, etc.
Foreign investors will not be far behind. Compare our prices for similar properties around the world – we live in a world economy – and our prices are amazingly low.
