Consumers in the United States have been conditioned to look for sales before they buy. Every Company knows when they promote a special price or “Deal”, it creates urgency and prompts consumers who may be thinking about buying to take action. The “Sale” doesn’t even have to make sense. This weekend, take a look at the number of companies that are offering “Memorial Day Sales”, and then ask yourself how these promotions are impacting your own behavior. The advertising of their special event may be just enough to push you to buying something you would usually pass on. Think about it. If the “Big Sale” strategy didn’t work, companies wouldn’t be perpetually using them. We’re now to the point where many of us won’t buy until we see a sale.
How does this relate to the purchase of real estate? This strategy does not work for purchasing real estate. Real Estate prices are rapidly rising. The “deal” you could have realized by purchasing a home just a few short months ago, has come and gone. Yet, many qualified buyers are not motivated to buy because they’re not seeing the BIG SALE sign on properties. This is a real problem for people who will likely buy over the next few years, because prices and financing costs are likely to sky-rocket over the next 5 years. That is why so many investors have been gobbling up real estate opportunities. Consider the following statistics that were just released by the National Association of Realtors on the housing recovery:
- Nationally, the median price of homes had increased by 11%, to $192,800 this April as compared to a year earlier.
- The number of sales this April increased 9.7% since April of 2012.
- The number of homes available for sale nationally in April dropped 13.6% when compared to April of 2012.
- Homes are now averaging just 46 days on the market, as compared to 83 days this time last year.
- Foreclosure and distressed property sales are down 18% from last year, and are now at the lowest level since 2008.
- Limited availability and fewer distressed sales are likely to lead to significant price increases.
What does all the statistics above mean for the typical buyer? Consider that prices in many areas would have to increase nearly 50% before they reach their 2006 highs (Theory of Recaptured Appreciation). Instead of waiting for the media hype to motivate the rest of the buyer population to buy, doesn’t it make more sense to break the “Big Sale” buying mentality and instead take personal responsibility for motivating yourself based on sound economic principles of:
- Supply
- Demand
- Consumption
- Value
Take time this Memorial Day weekend to ponder the above question and you show appreciation for the brave souls who have lost their lives defending this great country.
Happy Memorial Day!