Can home values increase?
Aug 29, 2009
in
Commercial Property Loans
Can anyone explain to me logically, economically, how real estate values (non-land, non-commercial) can increase, going forward, without median labor wages increasing? I’ve done the math based on loan/value and avg affordable home cost. With the elimination of creative financing, I do not think it is possible.
and, again, real estate values as a WHOLE
My apologies…can values rise more than 15-20% without an increase in median wages.
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4 comments
Christiaan on August 29, 2009 at 9:30 am
I think you’re on to something here. I think that home values are confined on a yearly basis to not only what the market demands, what people earn, and ultimately inflation. The market can swing wildly up and down, but annualized you’ll find maybe a 5% ROI on a home purchase(depending on whether you get in under or over value). As wages increase, standard of living rises, more money, bigger and nicer houses, although that means more of a change in housing, rather than an actual increase in those same houses.
sassy2 on August 29, 2009 at 9:30 am
Well I own two homes and both have increased in value. Location and demand sets the price.
KING (I Own Alpha Wolf) on August 29, 2009 at 9:30 am
you are forgetting demand vs supply. It all depends on the location.
skiingstowe on August 29, 2009 at 9:30 am
Hi,
Yes homes do increase in value and will continue to increase in value even in what seems to be a "down market" I’m 50 years old and I own four properties. Even in this down market my properties have more than doubled in value due to what I have done to them. It has absolutly nothing to do with wages, but it has everything to do with supply and demand. I look for distressed properties at fire sale prices and rehab them. These are mutiple family properties with room for expansion. I approch the zoning boards of the town and seek a change of use permit and add addition units, and upgrade the existing units. This way the property goes up in value due to the capital improvements and the additional rents I can get once the property is improved. There is always a way to make money in real estate if you know what you are doing, and it has made my net worth climb drmatically. It is however very hard work if you do a lot of the work yourself. My properties have risen more than 100% in the last four years….even through this "down turn", and this doesn’t include the positive cash flow from the rents. I must admit that these properties had issues when I bought them, but they are now some of the nicest properties in the towns there are in. You have to think outside the box. Even when the properties were depressed I was making good positive cash flow for each building, but knew they could make much more if done properly. If I can’t make more than $1000.00 cash flow from each property right out of the shoot I don’t even consider them. And yes, I now make much more than $1000.00 per building each month. I’l like to make $2000.00+ profit per building, and this is my business plan which is working quit well. This is after all the bills are paid too, so yes you can make money and add value to a property even in a down market with reduced wages. Just remember this. "God keeps making more people, but He’s not make very much new additional land for them to live on". That’s a quote my Dad use to use before he passed away, and from what I can see…He’s right! He also made millions in real estate.