Los Angeles Home Appreciation 1986 – 2008
If you want to see a good example of market cycles you need look no further than Los Angeles. It’s about as predictable a market as there is, but that doesn’t stop the loopy behavior that takes place every up cycle.
When the economy starts doing well home prices start rocketing skyward. After a few years everyone in real estate starts making so much money they lose their heads and begin doing deals that make no sense at all.
But the market is white hot so they still make money. The L.A. Times starts writing articles about how everyone is making money in real estate so Joe Q. Public gets into real estate investing and the really silly money starts flowing. Reality shows about real estate investing starting appearing on TV. Those with a modicum of sense begin to realize, “sompin’ aint right here!”
But what do you do? How do you know where the top is? When is the big fall going to happen?
“Hey … ppssst. Maybe there ain’t go’ be no crash” Hee hee hee.
Then … Bang! CRASH!! “Ouch!” Hmm, bankruptcy. Oops.
What if you knew when it was time to get out? What if you knew when the market had gone as high as it was going to go and was beginning to head down? Would that result in some good decisions being made? Some bad decisions being avoided?
See the red line on the graph, and the green line? Those are moving averages. When you are at the top of a market, the red line crosses the green line. That’s when you sell! It’s as simple as that. Don’t make it harder than it is, just sell.
Likewise at the bottom of a market, when do you begin buying?
Look at the graph again. See in mid 1994 where the red line crosses the green line and begins to head upwards. That’s when you buy! Again, simple, no need to complicate it.
Now, Los Angeles is a high price market. Think about what your net worth statement would be if you bought one 100 unit building a year for five years, beginning in 1994 when the market was still depressed and deals were plentiful, and you then sold everything, beginning mid 2005 when the market was white hot.
That’s what Housing Alerts allows you to do. You don’t have to be a genius, you just have to be a subscriber. This is the most essential tool any real estate entrepreneur can have. Buy property without it at your peril.