The following is an article written by Prudential California Realty Broker/owner Bob Majorino. A version of it appeared in the Ventura County Star.
There is so much drama about the real estate market today — why is that? Is it because changes in market conditions came so quickly? Is it because a home today is such a huge investment and a lot of money is at stake? Or is it because we have been spoiled for the last eight or nine years by the market’s stellar financial performance as an investment? The answer is “all of the above.”
The reality is there is absolutely nothing wrong with OR surprising about today’s real estate market. Houses are still selling and buyers are still buying. Some houses are sitting on the market for months, while others are selling without a problem. Why is that? Well, any market which experiences an increase in inventory of 250-300% in a very short period of time will create more competitiveness among sellers. This does not mean that the value of your real estate investment has diminished. It means that, in a more competitive environment, someone may be more motivated by personal needs to sell sooner than you might be. Timing is the real factor involved, not the integrity of the investment. Because you see, the beauty of real estate ownership in California – and especially in Ventura County – is that if you want more money, just wait for the market to change to suit your personal needs. If you need money now, you can refinance at some of the lowest interest rates in history – tax free – until the market favors selling at the price and terms you find more attractive. If you need to move now, you may find that you can rent your property temporarily for the same reason. Talk to a Realtor for information on these alternatives.
Famed oil magnate J. Paul Getty was once asked by a newspaper reporter, “Mr. Getty, what is the secret to your success?” With a sly, craggy-faced smile, old J. Paul said, “Son, it’s simple. When everyone else sells, I buy!” Based on that theory, if you bought real estate between 1980-1985 or 1990-1995 – doom and gloom years representing the most recent market slowdowns – you are sitting pretty today if you still own it. Buying was the smart move. The sellers in those years were all trying to beat the market, i.e., buy at the lowest and sell at the highest. If this is your goal, go to Las Vegas and have some fun while you lose. If you want to make money, don’t do that.
Isn’t it interesting how most of what the average person does with his or financial wherewithal is done based on what everyone else is doing? If everyone else is buying stocks and bonds, then stocks and bonds MUST be the thing to buy to get rich quick. If you bought one house in the year 1999 when the stock market was going crazy with billions invested in useless “dot-com” hot-air investments, you could have made 50-100% return on your investment every year from that year until the present time! Understand that when everyone tries to beat each other to the finish line, they create the adverse conditions, which prevent them from winning their own game.
The one issue of real estate investment that most people do not do well with is the holding period. Real estate ownership is primarily intended to build wealth – not to make $30-$40,000 with a quick “flip” from one buyer to the next. Although that amount of money may solve a few small problems around the house, it is not how real wealth is accumulated. After selling costs and taxes, there isn’t that much left. Long-term ownership is the answer. Own the house until you find something more favorable, based on your needs, and then replace it with the next. Don’t ever get out of the ownership position. With this strategy in place, one day you will wake up wealthy, because you have accumulated a substantial amount of equity, possibly untouched by taxation if you are an investor.
If you are talking about owning real estate as a home, then buy what you want to live in and can afford comfortably and live in it – enjoy it! If you want an investment, buy real estate and hold it long term. You will win. The real estate game is fun and profitable, if you calm down and do what’s right for you and your family – not what everyone else is doing. Just think about it – how much did your mom and dad pay for their house?
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