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Housing Trends

December 2018

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The American Dream

Emotion plays a major role in why we buy most everything. We justify our emotionality with logic. It is really why we buy a home.

'It was a smart move'.

'It was the right thing to do'.

'The schools are the best in the city'.

We want what is best for our children and ourselves. This is what moves the American economy. I remember reading somewhere that 3% of our economy is based on needs. The rest are luxuries. Otherwise we would be all driving Yugos (or bicycles, or ee gads we would walk)!

I can recall the process when we purchased our home. The big emotional reason we picked our current home over any other was probably our kids and our aging parents. We are close to the grandparents. And we chose a property with a decent size area for the kids to play. The street is closed off in a closed off neighborhood. It brought my wife back to those days of 'kids, be back in when the street lights come on.'

This home was the one. Oh we looked at what we could get in the beach areas.
But all we would get was a yard the size of my current patio. Which was cool when I was single. Not when I am building a family.

We all have our reasons and biases for what we do. And that is OK.

The housing market is based on these biases and emotionalities. It is all part of the American dream.

Traditionally the purchase is justified with, 'it's a tax write off'. 'Real estate is the best investment that we could buy'. 'Real Estate Always, in the end goes up'. Of course deep down we know differently.

Of late, the other part of the major drivers in real estate has taken a nasty turn.

To help us out, the Federal Government has offered unprecedented opportunity for home buyers to buy with tax breaks and down payment assistance. If you add up all the incentives between Federal and in some states the total can get close to $20,000!

Let's also mention that interest rates are historically low. Prices are historically low. They are what economists call affordable.

I remember my Uncle said he could have bought an exclusive Southern California lakeside lot for $30,000. I just recently heard a friend of mine nostalgically whimper he could have bought acreage in the Hamptons for $50,000. Ah the good ole days, when real estate was affordable. Ech Hem!

If you do not own right now, please allow me to pour just a little salt in your wound. I just recently spoke with a high end Southern California 'I sell to celebrities' Realtor. In other words he knows people with lots of dollars.

He told me about a lawyer client of his who is going around an area in Southern California that has many foreclosures. He is buying them either pre-foreclosure or at auction at significant discount. And then renting them out for returns that would make Gordon Gekko of the movie Wall Street jealous.

This is happening all over the country. And in fact where we see the high gains in home sale volume is often caused by these investors.

Question? will you be one of their renters, or the owner?

Source: Tim O'Keefe runs search marketing firm Spider Juice Technologies and supports Positive real estate as a way to give back to the real estate industry.