Real estate, like other assets, has ups and downs based on a wide variety of factors. Buy low sell high is an investor’s rule, but in practice it’s not so straightforward.
The housing market is tied to several factors but ultimately it boils down to the basics of supply and demand. If an area is growing, the housing market is likely strong due to the influx of people needing a place to live. The amount and types of jobs will contribute to prices as well, with average wages affecting what prices the market will bear. In a perfect world, growth would be stable and predictable and deciding whether or not to purchase a home would be extremely straightforward since you would know that not only are you getting a good buy, but your home would steadily gain value as continued growth occurs. Unfortunately, that isn’t generally the case. A property’s value is often subject to factors that are well beyond the owner’s control.
One example that is still very much fresh on people’s minds was the financial crisis of ’07-’08. Compared to other places nationally, Hardin and surrounding counties came through the mortgage crisis reasonably well. For the most part we managed to skid sideways for a few years, as opposed to some areas which saw property values plummet by 30 and even 50%. That’s not to say we didn’t have price drops, but overall, we came through reasonably well.
The financial crisis struck on a national level, but there was another factor before then that affected our area specifically: the hype surrounding the 2005 round of BRAC (Base Realignment and Closure aka changes coming to Ft. Knox). I distinctly remember attending a meeting held primarily for Realtors, builders, and real estate investors where we were told flat out that people from Maryland, Virginia, and other areas would be coming here in droves; cash in hand from the $400-500k homes they’d just sold. We were on the verge of a boom and we had better be ready for it. Builders naturally scrambled to fill this soon-to-be housing shortage, building multiple high-priced spec homes (speculative, meaning it doesn’t have a predetermined buyer during construction). We were braced for the influx, however, the flood turned out to be more of a gradual trickle and some builders found themselves paying interest on construction loans for multiple properties that pushed the upper price points of our local housing market. On top of this, within a couple of years the subprime lending house of cards came crashing down, shocking the country’s financial system and driving our already faltering housing market down with it.
Coupling those two factors back to back sounds like a doomsday scenario for us locally and, for some, it was. Subdivision development all but stopped and people who made their living in the housing market held on for dear life. Overall, however, our area managed to hunker down and weather the storm better than many other areas nationally. According to data from the Heart of Kentucky Association of Realtors’ Multiple Listing Service, in 2007 the average home price was $142k, which dipped to $132k by the end of 2009 which seemed to mark our housing price bottom. Since 2012 the average residential sale price our area has risen from $138k to $173k.
So, with that said, is now the time to sell while the market is seemingly high? Or is now the time to buy and ride the swing higher? Honestly, who knows. It ultimately boils down to what you expect to gain from owning property. If you are flipping houses, then the price is one of, if not THE top consideration for turning a profit ASAP. If you’re looking to invest on a longer term for rental or other income, price is certainly a factor, but you have a broader window of time to work with. If you are looking for a place to live, raise your family, and call home, then the only right time to buy is when you find the right place. A home should be your safe place, your refuge, the place where you make memories that will be looked back on fondly for years to come. When you find a property that provides that sense of security, gauging where the overall housing market is may not necessarily be a primary concern.