When times are good, people fret over the deals they've missed. When times are bad, these same folks claim that real estate is no longer a good investment. Either way, they always find some way to color the future bleak (see Box 1.1).
Yet, since the early 1970s I have seen all types of booms and busts. I have seen 18 percent mortgage interest rates. I've lived through the of double-digit rates of inflation, the disastrous 1986 Tax Reform Act (which killed off the most profitable real estate tax shelter techniques), and the recent market of sky-high prices. Yet I (and nearly all other savvy investors) have figured out how to make money in every one of these market situations and all of the other types of markets in between.
multiple turmoils multiple turmoils
Among all the lessons history teaches, none is more certain than the fact that home prices will go up. Regardless of how high you think prices are today, they will be higher 10 years from now and much, much higher 20 or 30 years into the future. Don't make the mistake of believing that "home prices have reached their peak." Before you accept the naysaying of so-called economic experts, take a quick trip through some of their faulty predictions from years gone by:
♦ The prices of houses seem to have reached a plateau, and there is reasonable expectancy that prices will decline. (Time, December 1,1947)
♦ Houses cost too much for the mass market. Today's average price is around $8,000—out of reach for two-thirds of all buyers. (Science Digest, April 1948)
♦ If you have bought your house since the War . . . you have made your deal at the top of the market. . . . The days when you couldn't lose on a house purchase are no longer with us. (House Beautiful, November 1948)
♦ The goal of owning a home seems to be getting beyond the reach of more and more Americans. The typical new house today costs about $28,000. (Business Week, September 4, 1969)
Box 1.1 Those Folks Who Listen to the Naysayers End Up with a Pile of Regrets
♦ Be suspicious of the "common wisdom" that tells you to "Buy now . . . because continuing inflation will force home prices and rents higher and higher." (NEA Journal, December 1970)
♦ The median price of a home today is approaching $50,000. . . . Housing experts predict that in the future price rises won't be that great. (Nation's Business, June 1977)
♦ The era of easy profits in real estate may be drawing to a close. (Money, January 1981)
♦ In California . . . for example, it is not unusual to find families of average means buying $100,000 houses. . . . I'm confident prices have passed their peak. (J. E. English and G. E. Cardiff, The Coming Real Estate Crash, Warner Books, 1980)
♦ The golden age of risk-free run-ups in home prices is gone. (Money, March 1985)
♦ If you're looking to buy, be careful. Rising home values are not a sure thing anymore. (Miami Herald, October 25, 1985)
♦ Most economists agree . . . [a home] will become little more than a roof and a tax deduction, certainly not the lucrative investment it was through much of the 1980s. (Money, April 1986)
♦ We're starting to go back to the time when you bought a home not for its potential moneymaking abilities, but rather as a nesting spot. (Los Angeles Times, January 31, 1993)
♦ Financial planners agree that houses will continue to be a poor investment. (Kiplinger's Personal Financial Magazine, November 1993)
♦ A home is where the bad investment is. (San Francisco Examiner, November 17, 1996)
♦ Your house is a roof over your head. It is not an investment. (Karen Ramsey, Everything You Know About Money Is Wrong, Reagan Books, 1999)
♦ The trends that have produced the housing boom . . . have nearly run their course. This virtually guarantees . . . plummeting home prices and mass foreclosures. . . . (John Rubino, How to Profit from the Coming Real Estate Bust, Rodale, 2003)
Box 1.1 (Continued)
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