There IS No Bubble to Burst in Real Estate

by : Bryan Benson

Rising real estate values and falling interest rates get a lot of people in a panic. At the same time, it seems like the trend in rising real estate costs is ending, and many are concerned. In fact, in today’s real estate market, the turn of the tides can be described as a buyer’s market, one of the best in years, and that has some running scared, with the media pushing the idea that the "real estate bubble" is about to burst. Because most real estate investors have never received proper training in their investment ventures, most of them follow the media to determine what the market trend is.

Unfortunately, the media tends to speculate and sensationalize to the point of causing a frenzy, making people panic. As the real estate market takes its turn at this point, many are concerned the value of their real estate property is going to crash, and they forget the value has multiplied since its acquisition. In fact, in many of these cases, a real estate property has appreciated by over $100,000 and, with the cycle back to a buyer’s market, the actual value may depreciate by $10,000, meaning that the real estate investor still comes out with a huge profit.

What of the supposed bubble, though? If you are a trained real estate investor, you know the bubble is a pervasive myth created by media to gain the attention of viewers and get ratings. Look at the trends of all business. Most business is driven by supply and demand, and the real estate market is no different. When there is excess supply of real estate property in which to invest with few buyers, the prices of the real estate that is available are going to fall. At the same time, if there is not enough real estate property available to satisfy the demand of buyers, the prices are going to inflate. Supply and demand creates a cycle in the real estate industry, and while it may take years for a cycle to complete, it will always come back around.

Therefore, knowing the real estate market has currently entered into a state referred to as a buyer’s market, where there is an overabundance of real estate property and few buyers, the prices that have been soaring on real estate are going to begin to fall. Buyers will have their pick of the best investment properties for their own purposes, and sellers will have to accept what is offered, unable to demand a price, should they truly desire to sell their real estate property.

Eventually, the seller’s market will return, with too many buyers, and sellers will be able to demand outrageous sums of money for their property because purchasers will be willing to pay it.

In the meantime, there is no need to panic, especially if you are informed and have trained as a real estate investor not to write big checks or guarantee debt. You are aware of the cycle, as well as how to make use of the current state of the real estate market to continue to profit.