Predicting the Future

When you look at the news it is easy to throw yourself into a panic about what is going on in the mortgage market and the effect on the housing market. No one can guarantee the future but I like to tell people about my personal experiences as a great example of what can happen even in a supposedly "down market"

In 1987 I lived in Colorado. It is not an exaggeration to say that on many streets, at that time, every home was for sale. Many were banked owned. I decided to buy a parcel of land that had awesome views. Many people thought I was crazy - houses were not selling land was even worse. Yet, I purchased this land and sat on it. During ensuing years I built a home on another parcel that I bought and sold it for a nice profit. With the profit from that deal I bought a home that was about 3/4ths built and made changes, completed it and sold it too for a nice profit. Finally, I decided to sell the original parcel of land and made about a 300% profit on it. All of this in a market that was "down" the only thing I sold durning a "hot" market was the original parcel of land.

In fact my personal experience is that each and every piece of real estate I have purchased, since 1987 has been sold at a profit. The moral of the story here for me is that the long term outlook for real estate values is upward. They simply are not making any more land and a good house is always going to be a good house. The current problems in the industry are all about people making bad decisions. The decisions were both financial - accepting a loan that is not right for you and Strategic - buying bad homes (location, condition are the usual causes).

Besides my personal opinion you have base realities that never go away. Many of these can be found in simply demographics.

Demographics serve as a useful and reliable research tool for many fields and industries, including marketing, entertainment, and even politics. David Lereah, the Chief Economist for the National Association of REALTORS® (NAR), says demographics can also reveal a lot about different real estate markets. In fact, David believes that demographics can help predict future activity in certain real estate markets, including, in some cases, home value and appreciation. The following are some examples of key demographic indicators.

"Baby Boomers" – The largest generation to date, members of this demographic have now reached their peak earning years. In areas with a greater number of Baby Boomers, expect significant purchases of larger primary residences. In addition, Baby Boomers are likely to buy investment properties and vacation homes, leading to a substantial increase in property values for certain regions of the country.

Children of "Baby Boomers" – Born after 1980, this is the second largest generation to date. This age group has entered the workforce and is becoming established. In areas with large numbers of this demographic, look for sales of starter homes and condos to rise.

Immigrants – Different areas experience large influxes of immigrants at different times. It typically takes a full generation, however, for this demographic to begin buying homes and having an impact on local real estate markets.

Retirees – With advances in medicine and technology, we are living longer than ever before. In areas with large numbers of this demographic, or areas where retirees tend to move, expect inventories to drop and prices to rise.

The immediate thing that I see when I look at these four categories is that three of them are present, in a big way, in the Coachella Valley. For these reasons I think we have every reason to be optimistic about the future of real estate.