Let’s cut out a portion of history for a moment, the period from 2006 through 2012. The 20 years from 1986 through 2006 were great years for homeowners. At almost any time during that period, a family could buy a home, hold it for a few or many years, and they could bank a nice profit when they sold it. The longer the held it, the better they did.
We’re all familiar with the concept that no more real estate will be created. With worldwide populations growing, it would only stand to reason that more people wanting more homes would drive up values when the supply of real estate is finite. Sure, during that 20 years there were some ups and downs, but overall home prices climbed. It didn’t take a genius to make money, just the ability to buy and hold for a while.
People aren’t necessarily greedy, but they do want to do better and they definitely want to make that single biggest investment pay off over time. This can lead to some crazy behavior, and we saw a lot of that in the 2000 to 2006 time period. Prices were rising so quickly that speculation took over. A bubble grew, and when it burst, it was a messy thing. Many homeowners ended up in foreclosure because they bought at the top and got loans they couldn’t really afford. Some investors got caught with over-priced homes they couldn’t flip, thus losing their shirts.
However, if we start our home investment clock again in 2013 or 2014, after that cut-out period of 2006 through 2012, we’re going to probably enjoy another 20 years of happy times. They won’t be as happy as in the past though. It’s doubtful after the lessons learned in 2006 through 2011 that we’ll have fast value appreciation. Expect a stable and more sedate value appreciation curve for the next 20 years. Even if it isn’t steep, the fact that it’s an upward curve is good news.
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