In a posting I did back in May, I mentioned that the average yearly increase in home prices in the U.S. for the 100 years between 1900 and 2000 was only 3.4% (not adjusted for inflation). However, from 1997 to 2006, home prices increased by an average of over 19% per year.  Unfortunately the downward spiral that ensued, beginning in 2007, we are still in the middle of.

The smartest real estate investors not only made their money during this sharp upturn in the cycle from 1997 to 2006, but are also making money during the downturn.  This small minority of investors sold off their holdings at super inflated values right before the crash in 2007.  They are now rebuilding their real estate portfolios with deeply discounted or distressed assets; and making money when they purchase!

I met with a potential client today who mentioned, with an intriguing twinkle in his eye, that he has lived through multiple real estate cycles.  With 40 years of investing in real estate, he laughed when I asked him to share his thoughts on the cycle we’re in.  I was grateful to hear the confidence in his voice when he said that we would see the end of the downturn by this time next year or shortly thereafter.

I’m personally looking forward to the next upturn in the real estate cycle, but I’m actually more excited about the next downturn. Like so many other novice real estate investors, I wasn’t experienced enough to be poised for the opportunities that are being presented in the current downturn.

Any other thoughts or ideas on real estate cycles anyone out there would like to share?  Because my own knowledge of previous cycles is so limited, I would enjoy a dialogue on this topic.  Please share.

Posted by Corey Curwick on July 19, 2009