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Investment Strategies for a Post-Peak Economy

The Single Family Home Market

Part 1 in a Series

Earlier this year I had the honor to host a client appreciation night for MV Properties’ investors, partners, clients, and friends. At the event, I presented “Investment Strategies for a Post-Peak Economy.”

I’d now like to share some of the highlights of that talk, and discuss how we are guiding our clients in executing these strategies – so that they will build long-term wealth for their families.

The Cycle

Before diving into Investment Strategies for a Post-Peak Economy, it’s important to understand the premise of the title of that speech, and what the numbers are telling us about this business cycle.

One of my first lessons in this business is that real estate is cyclical, and that as investors we should do our best to understand where we are in that cycle, and plan accordingly.

So where are we today?  Is it time to buy, hold, or sell real estate?

The first question is easier to answer, so let’s start there.  In this article I’ll discuss the housing market, and then in upcoming articles, the investment property market.

In San Diego, it is now officially a buyer’s market.  The numbers are in, and for people selling their home it is taking longer, there is more inventory competing for buyers, and we are seeing price adjustments downwards.  As-of this writing, the County-wide pricing is down at least 7% from the peak last summer.

Each neighborhood and market segment will vary slightly from that number, some with greater price cuts, and some with less.

We are still up, very slightly, year-over-year.  But just barely.  Meaning home prices a year ago were 1%-2% higher than today, which sounds reassuring, but the trend is moving downwards:  a year ago prices continued to climb, peaking in the summer of 2018, and then started moving downwards.

So is this the beginning of a correction, or a blip on the radar prior to the summer selling season?

My answer:  it shouldn’t really matter.  Your home is a huge investment, but it is much more than that.  Timing the market perfectly is less important than finding the right home for you, at the right time in your life.  If I felt another 2007-2011 style price drop was coming, that would change the recommendation.  But I don’t.

At our Client Appreciation Night, I showed the following chart:

MV-chart-v2.jpg

If you had held off buying a home in 1991 because you felt we were at a peak, and wanted to wait for the really great deals to come along, you were right!  But you had to wait for 7 years, as prices bumped along a bottom before turning back up.

And in the meantime, you would have missed 7 years of living in your home. It’s a home, not a share of Apple stock.  A home isn’t just a pure investment! Using economists’ terms, we “consume” our home. That’s a weird way to say that we are building memories, raising a family, and getting to know our neighbors.

But from a purely financial perspective, the buyer who didn’t wait, and who purchased in 1991, built equity through paying the mortgage.  So a buyer’s timing in 1990 wasn’t great, but over the next 7 years they built more equity up than the amount they saved by waiting to buy at the absolute bottom.  They were better off financially not trying to time the market.

And – for those looking to time the market, remember:  we are still at 3.7% unemployment in San Diego. Job growth is what fuels the demand for housing.  As a region, have more available job positions than qualified people to fill them.

So while we are seeing an increase in the supply side, leading to softening prices – and that may continue – the demand side is as strong as it’s ever been.

It is a safe time to buy.  And if your life circumstances dictate that it is time to sell, there are still plenty of buyers.  You just need to adjust your expectations – it’s no longer a frenzied market, with multiple offers the first day.

MV Properties is here to guide our clients through these decisions.  We think about real estate obsessively, and create strategies specific to each of our clients’ needs.

If you are thinking about buying or selling a home, let’s talk and develop your strategy for building wealth through real estate.  

MV Properties’ boutique brokerage has the two best agents in San Diego, Todd and Rena Bell.  They truly appreciate the opportunity to serve you on your journey to wealth building. www.bellteamhomes.com

I personally work with select clients on multi-family property sales and acquisitions. I’ll write more about that market in an upcoming article. I’m also a developer and investor myself, and will discuss the strategies my partners and I are executing.

Reach out to me, or Todd and Rena, today so that we can guide you through a long term strategy of building wealth through real estate.

Next Article, Part 2 in a Series:  The Investment Real Estate Cycle

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