For most of our lives real estate investment has yielded the greatest return on investment. No matter where one lives, purchasing a home, fixing it up for resale, and selling and finally moving up into a better or bigger home has been our goal.
In 1970 and 1980 we had serious real estate slumps. Many families had to move out and allow the bank to foreclose because they could not afford to keep their homes. Real estate investors quickly saw an opportunity to buy up these vacant homes at very low prices. The banks and mortgage companies were only too happy to accommodate them and soon real estate began to appreciate once again. Families then saw that real estate appreciation in the double digits far and away exceeded the money they could gain investing in CDs or Bonds and began to buy real estate as their investment for the future.
Over the years real estate appreciation continued until in 2007, homes were appreciating at a 15 to 20% rate each year. People just had to get in on the wave of appreciation and sought to invest no matter what it took.
After all, buying a home for $350,000 or $500,000 could put a strain on the household budget but the suffering would be worth it in the end. Where in the past only one member of the family had to earn enough money to qualify, in 2007 both family providers had to show income and then some. Qualifying was almost impossible unless someone or some company could assist by not looking too closely at qualifying documents, appraisals where embellished, and lenders made unusual concessions.
Unfortunately, Adjustable Rate Mortgages where not clearly understood by many buyers and today we have massive foreclosures across the country. Banks and Mortgage companies now have to assume the burden of abandoned and vacant homes left by buyers who can no longer afford to make payments on their American Dream. We are in a serious downward spiral just as before. Most real estate brokers and economists believe the spiral will continue into next year.
Eventually, just as in 1970 and 1980 the fall will stop and there will be a leveling off of the depreciation. Then, those of us who have managed to save enough for a legitimate down payment and can qualify and of course the investors, will begin to purchase both new homes and resale homes. Appreciation will rear its’ lovely head and we all will look forward to a time when we can resume our plan to buy, improve, sell, and buy bigger and better.
The idea of course is to get to a point in time when retirement is our choice and we can retire because we have enough equity in our home. The money gained through this plan will far exceed that if one were to invest in CDs or Bonds and consequently, real estate will once again be your best bet for investing.