40_year_appreciation_chart_with_arrow_400I know – just like so many people were convinced during the boom that housing prices would continue to appreciate at 30 – 40% a year forever, many are convinced that the downward trend will continue too. But take a look at the 40 years of history in these 2 graphs and I think logic will tell you otherwise. We can always look in the rear view mirror and say “that’s when I should have bought or sold an asset”. Savvy investors know the best way to time an asset sale or purchase is to look at trends.

Take a close look at this graph. This is a picture of US housing prices over the past 40 years, put together by author and real estate radio talk show host Greg Rand. You’ll notice that over time, housing has increased at a steady pace. As with all investment classes, there have been bumps in the road  – at times, prices have risen at a faster rate, eventually peaked, then fallen back. Look closely and you’ll see those cycles. These are the housing cycles of the past 40 years. If you look at the chart, you’ll realize that the huge anomaly is NOT what has happened to housing prices in the past 5 years….it’s what happened to housing prices in the 5 years prior that was abnormal! What we’ve seen in the past 5 years was a necessary correction to an overheated market. But look where the line is now. Nationally, average prices are back on the track they would have been on had prices followed a steady upward trend. The cycle has corrected. Over the next few years, housing prices may wobble while inventory levels stabilize, but nationally we’re on track for modest, reasonable growth.

So let’s get back to basics for a minute….Historically, housing has been considered a long term asset. Homeowners bought to live in a home. Investors bought property to hold long term – their income came from a combination of short term rental cash flow and long term appreciation. Then something happened at the beginning of this decade. A LOT of people started looking at real estate as a short term speculative investment. The market overheated and here we are. But if you believe, like I do, that housing is a solid, long term investment, there is no better time to buy than now.

Of course, housing markets are regional. So let me tell you a little about the Sarasota area real estate market. Our prices peaked in 2005. By 2006, buyers had stopped buying and inventory levels grew to well over a 2 year supply of homes. Over the next 4-5 years, prices dropped dramatically. As prices came down, buyers started to buy again. Over the past year, our prices have been fairly flat and have settled at about their 2002 levels, on average.  The inventory of available homes for sale in the Sarasota / Bradenton area is now at the lowest level since the beginning of this decade. And for the first time in almost five years, a substantial number of Sarasota area builders are building homes! Take a drive through Lakewood Ranch and you’ll see over 160 homes currently under construction, and according to Milt Flinn, President of LWR Communities, they are on track to build 420 this year alone in Lakewood Ranch.

If you think you are ready to take the plunge, give me a call. If you are looking for investment property, I can help you evaluate the long term cash potential. If you are looking for a first or second home, whether it’s a luxury home on one of our great Sarasota area Islands, or simply a nice home in an active neighborhood, I can help you find it.

Posted by Andree Huffine on
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