Real Estate Investors: Real Estate Market Tides Have Changed Again
Rather than again go through an explanation of my belief of why timing the market right isn’t as important as timing your own finances and other personal factors I will give you a couple of links to posts where I go through that in detail. I am writing this post because it is topical and because it is always something that the public wants to hear about. This post is geared more towards real estate investors than the kinds of readers I generally write for which is homeowners.
So, homeowners or investor, if you are under the impression that whether the market is going up or down right now is the be all and end all of making your purchase and selling decisions, please give me a chance to burst your bubble (no pun intended but I’ll take it) and let you know where I am coming from before I give you the info that I know you want to hear:
All that said… at the end of last year I had noted that the Nanaimo real estate market seemed poised for change. If you only look at the statistics you would think that prices had started going up early last year but although average sale price is the best statistical indicator that I’ve seen of what prices are doing, they are not the same thing as value of actual homes. Average sale price statistics measure what people are spending on houses overall but it’s not quite the same as what the value of properties are. The best way to suss out what is actually going on with property values is to watch what is available and what is selling in what patterns on a daily basis for years on end. That’s a core skill for a Realtor like myself and really pretty hard to do unless you are working in my or a related industry. You can get some idea of things by fervently watching listings on the MLS regularly but it’s not the same as actually going into those properties often and seeing the dynamic between Buyer and Sellers up close.
What you can tell from looking at these average price stats is the broader shape of what prices do. They do not tell a perfect story but they do have the general scope of things right. If you pay enough attention to them over time plus take other solid information into account you build an understanding of certain broader patterns. I have seen stats from the mainland that go back a few years earlier to 1977 that follow the same pattern as above. For some really long term perspective items outside of the confines of these statistics have a look at some of my historical MLS finds that I shared on this blog from 1981 here and from local newspaper ads in 1961 here. Also worth mentioning is that over the years I’ve picked the brains of many Realtors who are/were much older than myself who in some cases have been in business since the 70’s and in once case 50’s. Canadian real estate guru Ozzy Jurock also has some very good info on real estate market patterns. There are certain conclusions I’ve drawn about the real estate market cycle based upon all of these things.
One of the conclusions is that there appears to be a 6-7 year cycle. The cycle being that things are slow for six or seven years which is when we experience a Buyer’s market and busier for six or seven years which is when we experience a Seller’s market. The rises in the Seller’s market outdo losses during the Buyer’s market even when you take inflation into account.
Here is the part you were looking to read: Now is a time when the markets are starting to pick up and if the above observation holds true then we should have another six or so years before the media outlets find something to make everyone panic about again making it all snowball into the next Buyer’s market.
How to make money with this information? I consider flipping homes in the short term to be pretty risky in any market unless you are a seasoned contracting professional but if you are looking to buy a property for investment that could use a little polishing, willing to rent it out for a couple of years while you accumulate equity and then fix it up and sell it for a nice profit… this is a great time to start that plan. It’s always a good time to start that plan if you have the patience, know how and income to support it but now is looking like a really good bet for the market helping a plan like that work out. Prices have just started to show solid signs of going up and mortgage interest rates… well they’ve been ridiculously low for a couple of years now but now they’re just… I don’t know how long that money is going to be available for so cheap. Everyone I speak to in my industry and the lending industry is amazed by it, doubly so if they were around during the early 80’s when there were mortgage out there for 17-21%. The historical average is around 8% last I heard so it would stand to reason that these rates are temporary.