Connecticut Real Estate | Homes for Sale

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Milford's Real Estate Expert

A Real Estate History Lesson

It is often assumed that real estate is an investment that never goes down in value.  If this market hasn’t convinced you otherwise, you just aren’t paying attention.  If you need further proof that down years can happen, you don’t have to go too far back in history. 

My husband and business partner, Dave, and I bought a condo in the summer of 1985 for $72,000 and sold it in early 1987 for $144,000.  In just a year and a half, we had a 100% gain.  Crazy!  Since we had to live somewhere, we bought a single family home.  The price we paid was $188,000.  In 1999, after living there for 12 years, we decided it was time for a move and sold it for $190,000.  Basically, we broke out even, not including the $30,000 we spent on renovations.  Okay, we lost some money, but at least we had a place to live during all those years and we did pay down some of the mortgage.  Don’t feel too badly for me.  Dave and I did very well on our 1999 purchase which has significantly increased in value, even with what has happened to real estate prices in the last year.

Why do I bring this to your attention?  Because we need to learn from history, and history shows that after home prices go up too fast, as they did in the first part of this decade, they tend to come down slightly, smooth out for awhile, and then start to trend up at a reasonable pace for a long period of time until things again get temporarily out of whack.  That’s real estate!      

You should note that real estate was never meant to increase in value at high rates of return.  If it was, most people wouldn’t be able to afford a home and first-time buyers would be left completely out of the market.  Fortunately, this isn’t the case.  Real estate was meant to provide shelter and keep up with inflation, and because of that it is a good investment.

You should also note that it normally doesn’t make any difference whether you sell your home during a time when prices are high or prices are low.  Because most people who sell still need a place to live, they are going to buy another home.  Therefore, you are selling and then buying in the same market.  If you sell at a high price, you will be buying at a high price.  If you sell at a low price, you will be buying at a low price.  It’s all the same!

If you are a first-time home buyer or a current homeowner looking to “move up” to a new home, you can take comfort that history shows your home will increase in value over the long-term.  However, if you are of the opinion that real estate values will spike back up in the near future, history shows this will not be the case.    

I hope this has given you a little perspective as to what is going on, you are reassured that the long-term value of your home is safe, and that this message gives you some comfort during the upcoming season.  Happy Holidays!