History Shows Why Now is the Time to Buy

If you’ve been watching the stock market the past couple weeks, you’re probably a little worried. There’s good reason for worry, but not if you're thinking of investing in real estate. Now is the time to buy.

For the past 40 years the United States real estate market has gone through a pendulum of boom and bust cycles. The key to being successful in real estate is knowing how to follow these cycles and buy at the right time. The time to buy is now. Don’t let the scare tactics fool you.

Right now the market is in a state of stabilization. The country’s economic recession that was brought on largely by the housing market crash of 2007, officially ended in June 2009. The market was previously in correction and once it emerges will be in state of recovery followed hopefully by a revival. During those parts of the cycle, prices on real estate will start to go up.

One thing that will always be true in real estate is that you want to buy low and sell high. Banks and lenders don’t want you to do this, because then they make less money. They want you to buy high and sell low, so they try to create panic when things are bad.

What’s happening now has happened before. According to many economists, the modern real estate cycle began 40 years ago. In 1971 a housing shortage and an excess of demand created a very profitable real estate market and helped foster a major boom.

A number of factors hurt the American economy and in 1979 there was a housing market recession. To combat the recession Congress passed the Economic Recovery Tax Act (ERTA) of 1981. It had an immediate and positive effect on the market, and by 1982 a new cycle had begun.

Home prices skyrocketed and led to increased uncertainty about real estate’s true value.

By 1986 the savings and loan industry, which helped propel the real estate boom by offering risky mortgages, began to suffer as borrowers defaulted on them. This led to the savings and loan crisis and the 1989 market collapse.

In response, the government made significant alterations to the tax code to encourage the real estate market and the economy recovered. By the mid-‘90s, the housing market was stable and growing.

The early to mid-2000s boasted a real estate market similar to the 1980s with seemingly endless construction and an optimism that home prices would continually increase. Again, real estate activity began to move away from individual entrepreneurs and towards large institutions. The institutions again gave out risky loans and soon customers began to default on them.

Defaults on home mortgages combined with a lack of oversight and an increased dependence on credit instead of real assets, created a panic and the real estate market collapsed again.

Congress again sought to do its part and passed the Dodd-Frank Wall Street Reform and Consumer Protection Act in July 2010. It contained a number of new regulations and government oversight, but virtually nothing to address the risky lending policies.

Once again, the stock market is falling and everyone is scared. But don’t let that fool you. Real estate property listings you can buy right now for $200,000 will be listed by Caldwell Banker real estate, Century 21 real estate, Prudential real estate and all the others will be selling for $500,000 or more. And it will be the same house. Now is the time to buy.