I don't know about you, but I like to listen to, watch, and learn from other successful people.
When the market is strong, people's purchases quickly increase in value, which can lead to euphoria, which can lead to rash decision making, which can lead to greed. At the height of the market real estate professionals saw lots of greed. Many sellers were being very greedy trying to get as much as they could for their homes even when profits were at crazy numbers. People all wanted in on the real estate boom which drove the euphoria, rash decision making, and greed.
When the culture is going one way, that is the exact time to go the opposite way . If this is true, then now is the time to buy real estate. People are fearful about the economy and the real estate market and as Warren Buffett says, when people are fearful he gets greedy. When people are fearful the natural tendency is to become fearful. This causes prices to drop drastically and the government to respond with programs to stimulate the market.
The point of maximum risk for any investment or purchase is during the euphoria state. From this euphoria (the height) starts a downward cycle. As prices start to fall, buyers go into denial which turns into fear, followed by panic, despondency, and even depression.
The point of maximum opportunity is at this lowest point, between despondency and depression. This is really what Warren Buffett means when he says he gets greedy when others get fearful. This is the point of maximum opportunity. Well guess what, we are at the point of maximum opportunity in real estate.
This point won't last long. History proves that once we reach this point it is followed by hope and then optimism and the cycle starts back up again. We are now seeing these signs of hope and optimism in the real estate market with first time home buyers and investors. All across Northern Virginia, we are experiencing multiple contracts on prices below $350,000.
With low home prices and historically low interest rates people are realizing that now is a great time to buy. As we saw in my last blog, the number of homes for sale continues to drop (low home inventory). Currently, we have around 8000 homes for sale in Northern Virginia and that compares to over 16,000 at this time last year. If this trend continues, prices will rise and there are some areas where prices have already started to rise.
Successful investors know not to follow the crowd because the crowd doesn't know where they are going. Most of the crowd is fearful right now so take the advice of Warren Buffett and take advantage of the opportunity that their fear presents. The time to buy is now.
No comments:
Post a Comment