Slow Growth In The Housing Market
By JD Esajian on September 13, 2013
If you are familiar with the story of the tortoise and the hare, you know that slow and steady wins the race. This may seem like a cliché, but in a world where we wanted everything yesterday, slow gains are the most reliable approach. This is particularly true in a housing market where home values have been rising slowly for the past few years. Slow growth in the housing market is a good sign. Some investors, however, would prefer them to rise faster. But if values were to rise too high too fast, especially coming off of a collapse, they would be susceptible to bursting again in the near future.
If you were involved in the housing market between 2006 and 2008, you must have known that the rate of growth was unsustainable. Investors were buying property and flipping it for 5-10% gains in a month, without doing any work at all. Even the average property was appreciating at a 10% annual clip, based off nothing more than buyer demand. When the bubble eventually burst, we all knew what happened. The growth pattern we are on now may be moving at a snail’s pace, but it is more real and less likely to burst any time soon.
Slow growth in the housing market does not mean there aren’t good flip deals still available. There will always be short term deals, either in new construction areas or distressed regions. This trend suggests that real estate may be a better long term investment than ever before. With the rental market still going strong, home prices still not hitting their peak and interest rates still low; there is still opportunity to buy, hold, rent and wait for values to rise in the future. This may not be what every investor wants to hear, but this is the way the housing market is headed. Slow growth is still growth, and this may be the best news for the industry in the long run.