I regularly hear people talk about the real estate "bubble" and when will it burst. Like any investment, there will be gains and sometimes losses, but there are some important things to keep in mind.
- A realtor cannot predict when there will be a market adjustment, and neither can anyone else. If we could predict that, we would all be multi billionaires.
- Real estate values have always bounced back. Unlike some investments that could potentially become worthless, real estate has always recovered. There has never been a 7 year period in history where real estate is worth less than it was 7 years before.
- The worst market adjustment ever started in 2008 and it was caused partially by the recession as most adjustments are, but the reason the adjustment was so large was because of the sub prime lending practices of the time. As the recession started, many people had already borrowed more than their home was worth so they simply walked away and left the banks with lots of homes to foreclose. This flooded the inventory with distressed properties leading to large price drops. Since those lending practices are no longer a factor, it is unlikely that we will see an adjustment this large again. Even after that, by 2013, prices had climbed to levels above what they were in 2007.
- If you consider real estate a long term investment, history tells us you should have a solid return on your investment. Plus, you get to live in your investment, you can't do that with your investment portfolio at Goldman Sachs.
When looking at real estate, if you're looking for a long term investment, don't worry about the "bubble." As long as you are willing to ride out any market adjustments, history tells us it's a solid investment.