“Coulda, Woulda, Shoulda”LIV Sotheby's
Most of us might recognize the old adage that states “the only thing that is constant is change”. My University of Denver (DU) economics professor taught that and I doubt there is much that rings more true. I have been selling residential real estate since graduating from DU in 1975 and have seen how interest rates, property values, and consumer confidence can affect real estate cycles.
There have been two major recessions that have slowed down the real estate market, both nationally and in Denver. The first was in the mid-1980s and the last one took place from Q3, 2008, until Q1, 2012. It appears to take awhile for us to adjust to a changing marketplace. We all know another business proverb stating how we should “buy low and sell high”. But the ultimate question becomes: just how do we do that? Typically, cycles run three to eight years in duration and are not usually as dramatic as the above two examples. The key to successfully owning real estate is simple; think long-term. We always hear about nice profits being earned by people who are “flipping” property by buying right, fixing up, and then selling within a few months. There is an art to that and those profits do not come without risk.
Time is our friend! A little patience will go a long way in helping you increase the value of your financial statement. In the 1980s mortgage interest rates literally ran between 9% and 18% and the level of foreclosures reached an all-time high by 1987 – 1988, when the market bottomed (similar to 2009 – 2010). Within two-to-three years, and throughout the 1990s until 2001, the market went up 150%. The market had started improving by 1990, but most people waited a little longer until their confidence level increased and they began to see others buying and selling their homes.
As opposed to other investments that tend to fluctuate and carry higher risk, real estate provides the advantage of shelter/enjoyment and benefits of home ownership. Over time and even through two recessions, real estate has provided long-term appreciation at the highest level. Take a second, and guess what the average price of a home in Denver was in 1983. Currently the average for single family homes and condos combined in Denver just broke the $400,000 mark for the first time historically. If you guessed $78,200 (in 1983), you are correct. Likewise, the average rents have increased at a very healthy pace from $387/month in 1983, to over $1,700/month today.
I have talked to many a buyer and seller who mention how they “coulda” have purchased a property for much less, “woulda” bought or sold a property but…, and “shoulda” done at least something.
Whether it was in the 1990s or over the past three years, lamenting missed opportunities that slipped away or were ignored, should only elevate your level of interest and desire to participate in the current market. Historically as well as recently, I have talked to many a buyer and seller who mention how they “coulda” have purchased a property for much less, “woulda” bought or sold a property but…, and “shoulda” done at least something.
From approximately 2007 – 2012, many households put their changing needs/desires on the back burner, waiting for a brighter or better market. If you believe prices and interest rates will not increase, or you are ideally happy with where you live currently; you can ignore the inherent message of this article. However, if you would like a little more financial inspiration, consider the fact that in a 32 year period prices have quintupled, while interest rates are about a third of what they were in the 1980s (and have recently started to move north). So, if you have owned a home for, say, 30 years, you might say that your money grew five times over…wrong! If you paid $80,000 30 years ago, put down 20% (or $16K) and the home is worth $400,000 today, you earned approximately 25 times, or 2,500% on your cash investment. And remember you are paying down the loan a little each month and writing off the interest and taxes as well. I urge you to contact your broker, or call us at LIV Sotheby’s International Realty to receive good and appropriate counsel.
LIV Sotheby’s International Realty compiles monthly, quarterly and year-end reports to help consumers make better real estate decisions, whether purchasing or selling a home. To access current market reports visit www.coloradomarketreports.com. For more information, contact downtown managing broker, Steve Blank, of LIV Sotheby’s International Realty at 303.520.5558¬. To service all of your real estate needs visit www.livsothebysrealty.com.