To channel Jan Brady of the Brady Bunch, data, data, data… The information out of Corelogic Case-Shiller today shows a slowing real estate market. Slowing price appreciation anyway. Sales we know have been slowing nationally for months, but it’s the appreciation slowdown that is garnering the most attention this month. And for good reason. Since 2012 the value of real estate has been steadily increasing. Therefore a slowdown is noteworthy. Right? Hmmm… maybe not. Let’s look at what I find to be the most salient point in the Case-Shiller announcement.
As you can see by the red dashes, even with the spectacular rise since the housing recovery began, there have been periods where the value of homes either paused or given a little back. In fact, if you look at the graph since its inception, as I’ve marked with the purple lines, during the relatively slow growth during the 1990’s, there were similar periods of appreciation moderation and give back.
So what’s the point? The point is that while we are in a period where the market is slowing, it is neither uncommon nor unexpected. Moreover, this is a period when the moderation, decline, giveback, or whatever you want to call it, should be viewed in the historical context as what it is: an opportunity. I don’t think in looking at the Case-Shiller graph you can conclude anything else because look at the trajectory. With the exception of the Great Recession and the epic collapse of equity value caused by Wall Street and lender greed via no income, no asset loans packaged as Mortgage Backed Securities and sold as solid AAA rated assets instead of the junk that they were, there has never been a sustained decline in real estate values. Thus what we have here is a periodic opportunity to acquire real estate at a better price than we did a while back. This “blip” will be looked back on, just as I have demonstrated here with my colored hash marks, as a period where those who recognized this for what it is and buy, will be thankful that they did. Have questions? Contact me here.