As soon as real estate started slowing down in 2022 and sale prices started to drop; the pundits were out and signaling that the end was near; the latest real estate spike is going to crash, absolutely. From Oakland real estate expert Jamell Tousant’s perspective, while prices have definitely cooled off, which is normal for the winter months, much of it has been due to interest rate hikes by the Feds intended to staunch inflation. That, of course, increases the cost of a mortgage, which in turn makes it more expensive to finance a home purchase. What was historically low borrowing levels increased, and sales naturally slowed down. As a real estate expert, this kind of seasonal dip doesn’t surprise Tousant at all.
Let’s say for a moment that the real estate market going into 2023 does crash and drop. Is that a buying opportunity or a fatal mistake trying to catch a falling knife? History does tend to spell out what is most likely to happen. First off, real estate, in the long run, has continued to gain value 75 percent of the time. The only folks who are taking a loss are 1) those who bought at the very top of a market or, 2) sold their homes at a loss and never got back in again. So, put aside those two categories, suggests Jamell Tousant, and the reality is any home bought at a low to mid-point in the multiple markets since the early 2000s has gained in value.
Second, real estate has consistently gained in value. For example, a California home bought for $290,000 new in 2002 is now, on average, worth over $520,000 in 2022. For a 20-year window, that is far better than any government bond interest gain, exceptionally better than any savings account or CD, and it is better than a good portion of the public stock markets, in Jamell Tousant’s opinion. Even more advantageous, the home never loses full value, unlike many non-FDIC insured investments.
So, historically, homes eventually go up. That said, there are dips in the market, and owners do have to wait for their way through them. The same California example above did fall to an uncomfortable $235,000 in 2010, at the worst of the 2009 Recession, ergo the term, “being underwater.” But that value returned by 2013 and has then increased ever since. The same pattern played out across the country in different markets with similar results, remembers Jamell Tousant.
As a result, for anyone worried about a market loss now in 2022 with an impending dip, just sit tight. And for those who have been on the fence and priced out, Jamell Tousant suggests that 2023 may very well be the ideal opportunity to get into a home or real estate investment over the next ten years going forward. This has been the case repeatedly since the late 1970s. Pay attention to history when trying to predict a doomed market. More often than not, history is the better teacher.