When Will Real Estate Values Begin to Appreciate Again?

When will the nation’s property values begin to appreciate again? This is the $64,000 question that real estate professionals, investors, and mortgage professionals would like to know. The truth is nobody can accurately predict the return of the real estate market.  Like everyone else, I can’t predict the end of this crisis either, but what I can do is tell you what will have to happen to facilitate that change. The answer is quite simple: America must reinvest in herself once again. Without an investment, real estate is as worthless as the Dollar is today.

Think back, or read a history book, about how families in the ’40s and ’50s used to buy homes. Young couples lived with Mom and Dad during the “courtship” prior to getting married, until they had saved 20% to put down on their “dream home”.  They made an investment in America, (i.e. the American dream). In the years that followed we have devalued that investment in lieu of credit and the easy access to it. Property values rose artificially and our nation became addicted to credit.

The value of the dollar has been demolished due to the same principle. When we place value in assets based on their ability to be easily bought and sold versus the value that has been invested in the asset, we devalue its worth. For example, two years ago I could have bought an $800,000 house (and I assure you that I cannot afford a house that expensive). The owner of that asset (the $800k house) placed value on his asset based on the availability of buyers like me who could buy the home. The problem is, this homeowner probably had less than 5% invested in the home. Where do you think that homeowner is today?

Had he put 20% down on his home, he would then own a valuable asset in which he has a real investment. This outlay of cash forces him to buy and sell his home in the same manner he would move an $800k investment around in the stock market – very carefully. Thus, the home has REAL value. However, having bought the home with little or no money down, the asset became disposable and so follows the real estate market.

So, as I said earlier, I cannot predict when the real estate market will bounce back, but I can tell you what needs to happen before it does. America needs to reinvest in herself by getting back to solid buying and selling principles. This strengthens home values, which encourages investors who employ builders who employ carpenters, painters, real estate agents, loan officers and so on. America was built on the “American Dream” which has turned into the “American Nightmare”; she can only be rebuilt by hard working Americans, not by Wall Street.

Aubrey Clark is a Syndicated writer, author and editor for Direct Banc, a low interest rate credit card directory.His current project outlines how to choose the best Airline Miles Credit Card and how to maximize the benefits when using it.

267 thoughts on “When Will Real Estate Values Begin to Appreciate Again?”

  1. I certainly agree for some of the comments here,and the best way to get back the value of real estate is to invest more and promote more to the market so they will know what really our business so that they will give interest for it.

  2. I have seen a good increase in business some investmetn and some first time home buyers. I do not expect 2010 will be a bragging year by any-means but do see things gradually improving. It is tough to predict but I am excited about 2012 here in Carmel Indiana. Indianapolis is hosting the Super Bowl and it always helps property sells.

  3. I think our economy should brace itself for a heavy dose of inflation. Home prices will rise to the past values, but the value of the dollar wont be there to back them up. As prices rise lenders will be able to justify loans once again.

  4. It’s all about supply and demand. Things are being propped up right now by govtrnment stimulus. It will be interesting to see how things pan out as interest rates increase and stimulus wanes. This is such a great bargain time to load up on properties if you’re an investor. If you’re a homeowner, things are going to be tough for a while. We are a resilient country, we’ll pull through it.

  5. The recent news shows the increases are stilling working but the increases have slowed and with the first time buyer progra,m going away in April we may see a very slow market in 2010
    Mike

  6. Aubrey,

    Crazy thing is that this article was written over a year ago, and this question is still on all of our minds. We are starting to see a few signs of life, but the forecast from most is that it may still take a little while. Very interesting to read this post and scroll through over a year of comments, all asking the same question.

  7. I agree to an extent if you have the cash and don’t have to borrow. There are lots of opportunities and if you find the right deal you can take advantage.

  8. This is really an interesting post. Although most markets are experiencing depreciation, some real estate markets are appreciating as well. This is because of the so many factors that affect the entire real estate market and one of these is the dropping of home prices.

  9. Hoping that the interest rate being fixed again at 0.5% in the UK will help the UK property values raise, and keep the rental market competitive as well.

  10. The dip in the real estate market has certainly raised the value that private landlords can command in the UK. But it looks like the buying market should pick up again this year.

  11. In my area in British Columbia, prices dropped and were at an all time low around early 2009, and have already started to recover. Interest rates are also very low still with a 5 year fixed rate of under 4%.

    I think all of the US and Canada will see prices rise, however, they will go up much more slowly than they have in the past.

  12. I think home values will start to bottom and appreciate again when the unemployment rate starts to drop and a bit of confidence returns to the economy in general. I agree that we have to to get back to the days of a real investment in the American Dream. That means 20% down and caring about what your credit score, debt burden and savings look like.

  13. Sound but easy answer. Someone asked if I was insane when I was quoted about the upturn in a Crain’s Chicago Business article. The thinking goes beyond Chicago into submarkets across the country. It all depends on where you are.

    I based my observation on HARD FACTS and observations after witnessing 43 units (over $11 million dollars worth of real estate at about $278 per square foot) sell in 90 minutes. 90 minutes! Yes, it was an auction. And yes the average purchase was 25% below last asking price. But the sheer momentum indicates something exciting is afoot. Namely that SOME people are very interested in buying real estate again.

    Check out the full article here. http://tinyurl.com/y8q4vj5

    Garry

  14. Business is starting to go up. With acquisition costs are at an all-time low, it’s not difficult to get in on the profit -taking.

    Certainly, the lenders processing times are slow. True, there are no more NINJA loans, ARMS, sub-prime, no doc and all the rest of the assorted smoke-and-mirror loan products. But, there are banks that have to get loans placed and are looking to close on solid “vanilla” deals. The wheels move slowly in this environment, but they do move. And when a bank is underwriting an investor with a 789 credit score who brings 20% in equity to the table,loans do get closed.

  15. Aubrey thanks for the great article this is a very interesting topic

    I am stating to fell the economy coming back here in Costa Rica. Aubrey you absolutely right here in Costa Rica we have not had to deal with as much of the economic melt down as what has happened in the US, and i thing this mainly because not to many people here have big mortgages with only a small amount of their own money invested.

    People here just don’t normally take loans on properties for a number of reasons interest rates are very high in most cases, the banks have some very strict guidelines for borrowers, and all mortgages require an appraisal which usually means a higher assessed property value and higher taxes.

    Most people just save up and pay as the go because they don’t want to be over extended if some thing happens to their source of income. and this is exactly why Costa Rica property values have been doing good. I’m not saying properties are selling for the same price they were 3 years ago, but they still selling at slightly reduced prices.

  16. I know we all want to hear that the market is going to be going back up soon…

    The reality is the we have a couple more years of depreciation ahead of us. Statistics show that there is a wave of foreclosures on the horizon that is going to be bigger than the past 24 months.

    2010 is going to get a lot worse and its going to start hitting the luxury priced homes as well. And lets not forget about commercial…

    Areyo Dadar
    Real Estate Expert
    Big Block Realty

  17. Invest now as the foreclosures out there are doing double time. If you’re able to buy something and hold it for a few years I don’t see how you can’t make a profit.

  18. I agree about reinvesting back to America. In our own little or big ways, we made this thing happen and we are the only ones who can get it back up. Let’s start reinvesting, not just in real estate but in banks and other investment portfolios. We can do this.

  19. it’s inevitable that real estate will appreciate again. The largest problem currently is that lenders are just not willing to step back into the market at thsi time. Buyers are out there – but without a loan transactions are not able to be completed.

  20. Although everyone is painfully aware of our financial meltdown, and how regardless of the money thrown at the machine, we are still in more of a slump then most realtors can truly thrive on, we have noticed over the last quarter of 09 the numbers have begun to rise on home sales in the Tri-Cities Area.
    Great Post, would love to see a follow-up in a few months!

  21. Only time will tell when values start to rise again. I feel it is due to the fact that many people are currently scared of the real estate market after all of the news during the bailout and how failed the system was. It is going to take a decent amount of time until the American public begins to spend like they used too. Hopefully this time when they spend they are thinking about the future and if they are actually able to afford all of the material items they desire. Lets face the facts though the housing market will eventually come back up due to the pure fact that individuals want to own homes it is a feeling that many strive for. The real key is purchasing homes within our own means and not over investing ourselves and defaulting on mortgages.

  22. I have seen current trends that show real estate values starting to rise is small increments. It is nothing compared to what we were all used to but I feel it is a step in the right direction. It is a shame how unstable the market had become and the amount of loss it brought on to some people. Hopefully with the new pulse to the economy we can get back to where we once were!

  23. There is a lot of “shodow inventory” that is looming. Well over 10 million homes are set to foreclose this year, The process has been held but by all of the bailout programs that the banks had to adhere to in 2009. This has createeda huge backlog of properties that will hit the market in 2010. A sunami of inventory that will cause values to drop like crazy. Additionally there are still a lot of bad mortgages that have yet to adjust, forcing more homeowners to face foreclosure. I think we still have another 5-7 years of this mess.

  24. Interesting article. I think you make a good point about reinvesting in the “American Dream”. Unfortunately, agree with many of the other posters that the end may be further off than we would like. This is bad news for the real estate market, good news for the buying market, and a double edged sword for those of us stuck in between.

    I have been looking to invest in some excellent apartments for sale in the DFW area in order to do some renovations and then resell. But with property prices so low, I am worried that even if I get the property at a steal, with selling prices I will not be able to make my money back once they are done.

  25. I think the current economy and the lack of easy credit is going to slow folks down a bit more than a change on the view of the American Dream. Knowing what could happen (today’s market) will temper at least this generation during their next home purchase. Then the cycle could start again if we forget our past.

  26. It is a shame that there really is no telling when the market will start to rise again. I currently work in Boulder, CO and the market trends have been a bit up and down here recently. Nothing has been stable enough to actually find some faith in. I feel that the National economy as a whole is still in a slump and it will need to increase before it trickles down to real estate.

  27. I currently work in the Miami, FL area in the Luxury Condominiums and Real Estate business and we have yet to see any steady increase in our market. The interesting fact is that our market wasn’t hit as hard as the entire housing market of the United States. It just seems like growth in many of the cities throughout Florida has started to slow down. Hopefully soon this all will turn around.

  28. Well written post it truly is the main question on the entire markets mind. It really is up in the air still as to when prices will start reflect the information they once did. I am a Realtor in the state of South Carolina and we still haven’t seen any large jumps in the right direction yet. Hopefully with our economy slowly building back up the real estate market will soon follow.

  29. Great article. I think this is a great question that is on everybody�s mind heading into the New Year. Thank you for the post. I hope things turn around over night, but no one is holding their breath for that!

    Robb
    Arch Interim Housing

  30. Home prices still have a way to come down before they are affordable for families again. Prices just got way out of whack compared with the average families salary. We probably won’t see a turn upwards again until the jobless rate come down. There are just not enough high paying jobs to support housing right now.

  31. It is hard to say when values will start to appreciate again. It is quite a shame that they have gotten to the point they have. America as a whole got caught with their hand in the cookie jar and we are all now paying for it. Hopefully once our economy starts looking better and moving along the real estate market will soon follow.

Comments are closed.