May May Be the Start of a New Real Estate Cycle?
The real estate cycle is cyclical. Sometimes the cycle takes 5 years to complete a revolution and other times it takes 15 years. Either way, the real estate cycle tends to hold true eventually. Most agree that now is an extremely great time to buy real estate. Prices are low, cheap properties are available through foreclosure and short sales, and interest rates are still at historic lows. While many are still fazed by the dismal media reports of home owners losing their homes due to predatory lending and possibly the worst economic downfall since the late 1920’s, wise investors have managed to look beyond these reports to analyze the numbers.
The numbers are in: it is a great time to buy. As a brief segue, for an example numbers lining up, here is how Bill Stewart, my real estate broker and seasoned Ventura real estate investor, knows when the numbers line up. When he can purchase a $160,000 2 bedroom Buenaventura Gardens Condo for 20% down financed for 30 years at 4.75%, borrow the 20% down payment from a friend (hard money loan) or from equity on another property at 3% interest, and rent the unit for an amount higher than what principal & interest is on both loans, the HOA dues, the taxes, and additional insurance costs, then it is a great time to buy. Bill bought this BVG condo in January. It is clearly a great time to buy.
For information that reaffirms what I have said above, here is a video from a WSJ article entitled: “Why 2011 May Be the End of the Housing Crash” and below are some great quotes from the article as well.
Houses are a Good Deal
At the peak, midway through the last decade, a home in Los Angeles cost the equivalent of 4.5 years’ pay. The average price has since fallen to just over two years’ income now. That’s well below its pre-bubble average of 2.6 years. This means average Los Angeles homes are cheaper in “real terms” than they were typically during the period 1989 through 2003.
Check out my article on buying in Ventura.
“Pricing is down so much in some markets that when you analyze renting versus owning it makes much more sense to own,” says Michael Larson, a real-estate analyst at Weiss Research in Jupiter, Fla.
Investors are Stepping In
Here’s another sign the market is nearing a bottom: Investors have started to buy up houses and condos, in some instances paying entirely in cash. That’s a far cry from the heady bubble days when borrowed money seemed the key to riches. The bubble-era speculators who got burned tended to buy at the peak and borrowed heavily to do so. When the crash came, they quickly saw their wealth erased.