So you have a piece of property. Or two. Or a gazillion, it doesn’t matter. Here you are, all excited because you’re going to cash out like mad. Even if your rental properties don’t earn you income right now, you can sell your house at a higher price, because real estate appreciates, right? RIGHT?

I hate to break it to you, but it’s not always the case. While we’d like to think that real estate is a great investment, you might lose money on it.

 

Real Estate Prices Past, Present and Beyond

No one is going to blame you for thinking that real estate prices rise. According to the National Association of Realtors, their historical housing price data from 1968 to 2004 for the US reveals that housing prices increased an average of 6.4%. And there was no decline at all! Oh, to be real estate owners then.

Sadly, 2004 was the last year before the real estate market plateaued, with an average house costing around $180,000. There was only a 1% increase within the next two years. And let’s not forget the real estate market crash in 2008. Around two years later housing prices went back and what they were at 2004.   

BUT…*cue drum roll here* these statistics don’t paint an accurate picture.  You know that lovely word called inflation? Yeah, that adds to the whole housing costs too. Sizes of homes in the US got bigger as the years went on, with average homes increase almost 1,000 square feet since the 70s. Factor in inflation causing a rise in building material costs, it makes sense that real estate prices would go up.

Even then, there were dips in real estate value. Both World Wars and the Depression contributed to falling housing prices in the US.

Oh, you’re saying you don’t give a crap about all of the above.Let’s get down to the nitty gritty then.  

 

The Real Picture

All the stats above show part of the picture. Depending on what region you’re from, real estate can vary a lot. If you’re in an area experiencing a lot of growth, another area might be in decline. So in reality, it really doesn’t matter if you see on the news that housing prices are rising, if your area sucks, it sucks.

There are also a lot of factors that account for real estate prices. If your area suddenly has a lot of job growth, you bet rental areas will have people flocking to it, like the next Star Wars movie release. Or if there seems to be a lot of houses on sale in your neighborhood, sellers may lower their prices just to rid of it. So what are we really getting here? You need to know your neighborhood to really determine if real estate prices are really on the rise.

Oh yeah, if you’re really wanting to bank on real estate? You have to sell it first. How in the heck will you make any money if you just keep the darn property? Even if the value of your property went up, you’re not really making any gains until someone takes the property off your hands. In the meantime, you’re just paying more real estate taxes until that happens.

Also, don’t forget that your property can just as easily depreciate in value. When that happens, you might be losing a lost more, especially if you took a loan out to purchase the property. You might find that you owe more than what the property is currently worth.

 

So What Now?

Look, let’s get real here.  If you’re banking (haha, get it?) on buying real estate and having in gain in value, don’t. Instead, think about other ways to profit from real estate. And believe me, there tons of them.  Of if your goal is to just own a home, then it doesn’t matter if your property appreciates. In the long run (we’re talking about living in a home until retirement), you might see a potential profit from your home.

 

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