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Real Estate Appreciation & Investment

April 9, 2009

Just like other markets the real estate markets are cyclical.  We have seen a large correction as prices have fallen from the high in 2005.  What we are seeing now is an over correction.  The market will swing back.  I believe we are now at the bottom in the local Sarasota Market.  Many listed homes are still priced too high but the good deals are selling very fast as investors are picking up the distressed properties.  To the south of Sarasota Habitat for Humanity is purchasing homes fro less than they can build them and the have no labor costs.  Just as the peak prices were unsustainable the new lowest are unsustainable.  As soon as consensus is reached that the market has bottomed three years of pent-up demand will be released in a market with low prices and low interest rates which will send prices upwards.  It is obvious that prices have gone down in recent years but we have to look at the market in terms of decades.

According to the National association of Realtors, appreciation in past decades was as follows:

  • 1970 – 1979 up 142%
  • 1980 – 1989 up 52%
  • 1990 – 1999 up 45%
  • 2000 – 2008 up 42%

Our market began it’s rapid appreciation in 2003 and then declined in 2006 to 2009 but if you purchased in 2000 or 2001 you would have paid less than today’s value.  Real Estate is a long term investment and substantial tax advantages and todays low interest rates provide a great amount of leverage.  Smart money got into the past market cycle in 2002 or 2003 and sold before the peak and smart money is doing it again.

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