The New Decade of Real Estate May Have Already Begun

by Simon Lindsay on Real Estate Investing

Real estate markets move in cycles, as anyone in the industry knows. One decade they’re up; the next, they’re down. Of course, over the past 20 years we’ve become accustomed to prolonged boom cycles that have defied historical predictions and created one of the biggest real estate bubbles in our history. Plus, currently we’ve been through five straight years of declining prices, rising foreclosures, tighter lending standards, and sky-high foreclosure inventory.

With all that considered, we may be in the beginnings of a new decade of real estate.

The reasoning for this is simple. For starters, what goes down will eventually come up, in the long run. From a short-term perspective, of course, everything looks messy. But from a long-term perspective, historically low prices means that there is a massive profit margin to be had if prices return to anything even close to their 2006 highs.

Plus, interest rates are historically low, and it is not for certain how long the Federal Reserve will be able to keep them at this level. Sooner or later, they will have to rise – but before they do, buyers have plenty of time to get financing that is, for lack of a better word, cheap.

Additionally, inflation will be set to rise over the next decade as deficit spending and debt continue to mount. Since inflation is almost an inevitability – the government’s fiscal policies to keep inflation in check can only go so far – “real” assets like gold and real estate become more valuable. Therefore, owning real estate is also a hedge on a devaluation in the dollar that may occur in the near future.

All of these reasons and more point to the notion that the next ten years may be marked by a real estate bottom, followed by a prolonged period of rising home values – and with that, profit.