Whether you're buying or selling a home or looking to invest in real estate, the most common question you're likely to ask a real estate professional is “Will the market be going up or down?” While that is a critical question, the answer requires knowledge of an unknowable future. Most real estate professionals I know have the good sense to acknowledge their own limitations in the face of such a question. But, quite unfortunately, there are more than a few self-proclaimed experts from within and outside the real estate profession who make bold and specific claims about the future performance of real estate, (i.e. the market should go up/down 10% next year) including the chief economist of the NAR. When these claims inevitably fail the general consumer, the entire credibility of the real estate profession is shrouded in doubt.
So, rather than blindly follow the advice of anybody who calls themselves an “expert,” it's best to follow the example of some
of the smartest real estate people I know and do your own homework. Real estate is a complex investment vehicle that incorporates elements of contract and tax law, finance, insurance, local and state regulations, geography, and many others. Any one of those elements can drive the price of property up or down. Within that complexity, however, lies the opportunity for the diligent to prosper.
For buyers and sellers of homes, a highly localized real estate broker can provide valuable real world information about a neighborhood that would either be difficult or impossible to gather casually. Since your broker is your resource, ask plenty of questions. For investors, the key is to find a real estate broker who can do the proper analysis to guide you in the right price to pay to meet the target return benchmark and find you those properties. Then, find a competent tax accountant to help structure and minimize your tax burden.
Finally, when considering that initial question, always factor in the time frame that matters for you. Between 6-18 months, you can usually guess at the direction of real estate prices yourself as well as any real estate professional. Between 2-5 years, that's when everyone is flummoxed. In the 6-10 year time frame — the average amount of time a homeowner stays in a property — most of the time prices have gone up, reflecting the general growth in the population and economy. So, if you're comfortable with your finances and like a property, then there's no problem with buying. And, for high population density locations around the country, like major coastal cities, prices have infallibly increased over 20+ year time frames. Ultimately, real estate is a limited resource and the planet is just getting more crowded everyday.