Real Estate Cycles

by Montana Grey

Dad, Dennis Martin, has been selling in different real estate cycles over 30 years.

My friend Dennis Martin who is a Realtor in Littleton, called to relate a conversation he’d just had with his daughter Dawn about the current state of the Denver real estate market.  Dawn, who is also a partner with him in their Real Estate business, asked him if he could remember a time when things were so challenging.

Dennis and I reminisced about the ups and downs of the Colorado market during the time we’ve been in the real estate and mortgage fields respectively, and surprisingly, I took great comfort from our historical review.

It reminded me that life, like nature, is filled with cycles.  Colorado has seen moments of great prosperity and also moments of powerful economic downturns.  Yet, after each downturn would be a recovery and it seemed an even greater surge of prosperity.

Dennis was lamenting that people were holding off their decision to buy because they wanted to “see rates go just a little bit lower.”

We both laughed because we remember a time during the Jimmy Carter and Ronald Reagan Presidencies, when rates exceeded 18%!

I remember people BEGGING us to find them something below 15%.  Rates rose from an annual average of 11.20% in 1979 to a high of 16.63% in 1981 and did not fall below 10% annual average until 1991 when the average was 9.72% — still more than twice what is available in today’s market!

I also remember a time when there was NO money to be had from any bank.  Canadian banks were selling “Letters of Promise” that guaranteed nothing – not a rate, not the fees, nothing.  They were selling these letters for huge fees just to “promise” they would provide money at some point.  Brokers were charging high points for these “Letters of Promise” that promised nothing.  And lenders were paying the fees just to stay alive.

I remember when Denver suffered a huge economic fall from the penny stock collapse and oil prices.  Downtown Denver felt like a ghost town.  It was filled with many office buildings that were vacant.  Houses stayed on the market for as much as two years before they sold for greatly reduced prices, and many lost their jobs.

Those times ran their course, and in every case, greater prosperity returned with a fury.

But my conversation with Dennis gave me a greater perspective.   It’s not only the uncertainty we are facing now, but it is our decision about how to deal with that uncertainty that will determine our personal experience of these times.

We can focus on the 9% unemployment rate, or remember what that means:  91% of people still have their jobs!  Many very wealthy people birthed their inventions and businesses in times of recession or depression.  The internet still provides fabulous vehicles for multiple streams of income if one is just willing to learn.  This is a part of the equation that did not exist in previous depression cycles.  I can only imagine what some of the greats who became multi-millionaires would have done if they’d had this amazing tool.

But here’s what I really gained from my conversation with Dennis.  As Joey Reiman says, “Our most valuable piece of real estate is our mind.”  I agree.  We can choose a mindset for opportunity or fear and the outcomes for each are predictable.

Next, we can take a look at history and look at the lessons from previous economic depressions and the correlation to real estate purchases.  Then, we can really make a choice that could positively impact this entire cycle.

In the 1790′s the Revolutionary War ended and real estate suffered because 30% of the population immigrated to Canada. Eventually a depression occurred.   In the 1860′s, a time of another recession turned depression,  the Civil War ended and real estate again suffered because of war casualties.  Then, again in the 1930′s real estate was down due to reduced exports, WWI and the 1918 flu epidemic!

Three recessions that evolved into depressions with the common denominator that they all appeared to be exacerbated by a down turn in real estate activity!

It seems that history is telling us that keeping our real estate market active is a significant antidote to an economic depression.  And waiting for another one half percent drop in rate simply makes little sense.

Real estate opportunities are so incredibly abundant right now, you can COMBINE the lowest rates in documented history with the best purchase values imaginable.

Remembering that life IS filled with cycles and that what goes down will eventually come up, real estate values will increase again.  They always do.  So will rates, as the banks begin to really deal with their own financial tsunamis.

The pendulum has swung.  To get a loan now is like a turn back in time.  When I began in the industry, you had to qualify with 20% down, and ratios of 28/36.  28% of your income could go for your housing and 36% was the top end that included housing and all revolving debts.  Those parameters made good economic sense.

So what’s the good that can come from these times?  And how can that benefit you? Let me restate some of the above:

• Rates are lower than they have ever been in documented history
• Real estate opportunities are simply fabulous! Between motivated sellers, short sales, and desperate banks, YOU, as a buyer, have total leverage to begin creating personal wealth.
• Your ability to not just survive, but thrive, in these changing times depends on your mindset. And you are in complete control of that. So regardless of what happens “out there,” you can choose to see opportunity or fear. Who knows? You could become one of the millionaires who found the nuggets of gold in seemingly impossible times.
• Purchasing real estate and keeping the real estate market active could have a profound positive effect on the progression of this recession.
• To qualify for a mortgage now, you’ll be revisiting your own budget and life style and have the opportunity to experience the peace of mind that comes when you are not in fear about your finances.
• As for concerns about employment, remember the great men of history. They were not defined by just one career or skill. Roosevelt was a cowboy, soldier, naturalist, historian, father, statesman, and winner of the Nobel Peace Prize. Your opportunities to become a Renaissance man or woman have never been greater.
• Life is defined by change and cycles and renewal. Set your sails to catch the winds and you’ll not only be fine – you will thrive.

(Ed: Montana Gray is an author, internet marketer, and life change coach.  Her clients call her a “dream weaver.”   Visit http://www.guruofchange.com for free audio and pdf tools to help you maintain your success mindset.)