Real Estate Market Timing:
Buzz or Baloney?
By: Ken Wade
Do you ‘follow the herd’ or think for yourself?
Sadly, many homeowners, investors and other real estate professionals are in a
world of pain right now because they believed everything they heard over the
last couple years.
Here’s something you probably hadn’t heard before…
For the overwhelming
majority of U.S. real estate
markets – there
never was a ‘boom.’
Here are the real facts…
Between the 1st Qtr of 2002 and 1st Qtr 2006 (peak housing ‘boom’ years)…
- Only 25 markets (7% of the U.S.) experienced a true housing boom (i.e. - four-year total home appreciation over 80%)
- 75 Markets (20% of the U.S.) realized total appreciation between 38% and 78%
- Half of all local U.S. housing markets realized cumulative home price appreciation of less than 9% for that entire four-year period!
- One-quarter of all local markets in the U.S. never realized even 6% total appreciation during those four so-called ‘boom’ years.
In other words, a small handful of markets grabbed all the media attention.
In the words of French philosopher Voltaire:
“Those who can make you believe absurdities
can make you commit atrocities.”
Following conventional wisdom like everyone else takes you down the same path as everyone else. If you’re still listening to the media, this might surprise you…
There is NOTHING special
or unusual about today’s housing market.
It’s not even a ‘crisis’ or a crash – it’s just an easily
predictable and quite natural part of the real estate cycle.
To quote another guy who’s been around for awhile:
“Believe one who has proved it.
Believe an expert.”
Virgil 70BC-19BC
The problem for many investors today is they simply don’t have access to a bona-fide
expert, or even the same info those experts have.
We all know real estate markets
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Chart #1
U.S. Real Estate Market Cycles
1975-2007
If you have the right tools, profiting from these cycles is easy.
The hard part was figuring it out on a local level.
That’s why major institutions employ masses of minions to translate all
that local market information.
The ‘little guy’ doesn’t have a chance.
They have no option but to listen to the media (and to believe what they
hear).
Until now!
I’ve spent most of my career tracking (and profiting) from local real
estate market trends. I’ve thrived through all three market cycles of the
last 30 years.
Rule #1:
Forget everything you were ever
taught about ‘fundamentals.’
Everyone seems to have their own particular mix of what they think is
important… their own special blends of statistics such as:
·
job growth
·
mortgage rates
·
building permits
·
housing starts
·
population & migration
·
personal income
·
…and many, many others
This is called ‘fundamental’ analysis; it doesn’t work for predicting market cycles and it will never give you actionable decision triggers.
This is called ‘fundamental’ analysis; it doesn’t work for
predicting market cycles and it will never give you
actionable decision triggers.
Rule #2:
Markets rise and fall only
because of Supply & Demand.
Period. End of story.
Rule #3:
Market Psychology is the primary
driver
for real estate (and other) markets; it’s what
causes markets to go up and down in the first
place.
Take a look at these three markets…
Chart #2 - San Diego, California
Real Estate Market Cycles (1975-2007)
Chart #3 - Midland, Texas
Real Estate Market Cycles (1983-2007)
Chart #4 – Flint, Michigan
Real Estate Market Cycles (1979-2007)
National real estate information is interesting – but you only
invest locally.
Most experts say low interest rates and easy credit caused the ‘boom’ in
the first place. But… all three of these markets had the same
access to low rates.
Obviously then, low mortgage rates were not the real cause; each of these
local markets acted very differently to the same opportunity.
So what was it?
It was a different combination for each local market. The “why” doesn’t
matter as long as you know “when” and “where”!
Market psychology always plays a big role. Take San Diego for
example. It topped out in 4Q 2004, two years before the ‘boom’ was ending.
There weren’t any major changes in jobs, mortgage rates or other
fundamentals; investors and speculators simply started heading for the exit
door, and the media got hold of it.
In short – market psychology!
The only way to accurately measure market cycles, including investor
psychology and the hundreds of other different influences on any particular
market, is by using Technical Analysis (‘TA’).
First invented by ancient Japanese rice merchants 500 years ago, TA is the
underlying method used by every Investment Bank and Global Trading firm on the
planet. TA is the basis for trillions of dollars in daily
stock, commodities and financial market trades worldwide.
Now it’s available for the ‘little guy.’
…and it’s simple to use.
If you can tell the difference between red and green, up and down, you
can easily profit as an investor.
With a click of a mouse, you can now access the same information the ‘big
boys’ have… for 381 local real estate markets covering 93% of all U.S.
housing.
Moral of the story: you need tools, not talk!
- Check out the free tutorials and videos below.
The author, Mr. Ken Wade, is a C.P.A. with an M.B.A. from the Harvard Business School. He’s in his 3rd decade of entrepreneurial real estate investing and has completed hundreds of real estate deals valued in excess of $100,000,000.
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To learn how you can profit from local real estate market cycles,
please check-out this free interactive & educational webcast:
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