I've been in the mortgage/real estate industry for over 10 years now. I can also remember back to the early 80's when my parents struggled with 18% interest rates. It's been interesting watching real estate and how it's kept pace or exceeded inflation over the years. I know allot of people are a little depressed right now. We've had these amazing years of opulent rates of return. 60% a year in Las Vegas, 40-60% In southern California, Florida, Texas, North Carolina. Even in our small market in Utah we've seen multiple 20% plus growth over the past few years. But the party has been over now for a while and some people are wondering if it's ever going to return.
If your feeling too depressed, just go talk to someone who bought a home before 1975. Anyone will do for that matter. Ask them what the average home was selling for and if they lived in that same house today, what would they be able to sell it for in today's dollars!! Yes, the numbers boggle the mind, and even though some homes have appreciated in excess of 1000% in most markets, the numbers continue to move upwards, despite recent trends.
The recent market correction maybe more of a result of incomes not keeping with cost's then the lack of demand, and as incomes increase and inventories decrease, the demand will naturally return to the market. Along with incomes, interest rates have also been a catalyst in the market. Interestingly enough the current rates are still low compared to other market's we've had in the 80's and 90's, but now a 6.25% interest rate is considered average, and anything in the 7's is considered a high rate.(wow) At a recent conference I attended, an economist predicted that rates wouldn't change that much in the future as well. He pointed out that inflation has been able to be contained through radical improvements in technology and education of laborers. The computer age has truly changed the way we do business and in result has allowed for businesses to keep cost's lower.
The other factor that will affect real estate is that immigration is continuing on an unprecedented number. According to the Realestatejournal.com, immigration will bring in 12 million people between 2005-2015! That's like taking the population of my entire state and multiplying it by a factor of 6!
If you really want validation that your in the right business, then do not look further then the baby boom generation. This generation is like the Energizer Bunny, they just keep buying, and buying and buying. Many speculate that second home and vacation homes will continue to be hot buys for the next 7 to 8 years. Then think of all the baby boom kids who will be buying homes. Forecasts are estimating another 19 million new homes will be built before the end of 2014.(realestatejournal.com)
So the next time your speaking to one of your fellow associates at the water cooler and they are moaning how horrible the real estate market is presently, just smile and think about the future.
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