I was answering a question recently where someone wanted to know what the US market would do for the next 12 to 24 months. If we ignore the fact that no one can predict then we can focus on a different assumption behind the question. The person asking was expecting that real estate moves uniformly across the nation. Far from it.
The graphic shows how different cities have responded since 1988. Note that the data is specific to homes only (not condo, etc.). It also is based only on property that has been sold more than once so they are tracking the change for specific homes over the time range. Condition of the property and improvements are not factored in. Even with all of the above we can still see some things.
1. Some cities have really spiked. Note that about 3 years ago Las Vegas’ population grew by 49% so you might expect some price rises when demand spikes sharply.
2. Employment matters. Many of the cities that have been rising show good growth in jobs. The poster child for declining employment prospects would be Detroit where home prices have largely crashed based on the chart.
3. Some parts of the US (Midwest to Texas, upstate NY, parts of PA, WV and some regions of the Carolinas) missed out on the boom in property prices over the first half of this decade.
When we read the headlines about how the housing market is way off, that prices are dropping or other such news we do not hear about the cities that never saw a boom. A recent Realtor survey showed 79 MSRs down, 77 MSRs up and 8 flat. The bottom row of Midwest cities provides a long term picture of how prices in some cities do not rise just because Phoenix, Las Vegas and a few other boom towns spiked.
When investing you really need to look locally to see what is going on in the specific market. Even if the market is up or down individual deals can be found that do not follow the trend. Savvy investors focus on making their profit when they buy and getting the cash when they refinance or sell. They do not buy and then wait to make a profit if house prices rise.
Buying at a discount does mean working to find the deals rather than just paying retail. Discounts are found and maybe even created by restructuring the initial deal.