The regional markets that had received the highest historical appreciation rates during 2003 to 2006 also had some of the largest price adjustments over the past 24 months. States that had these incredible high real estate returns, like California and Florida, have also seen the highest incidents of foreclosures. Everywhere you turn news reports share the dismal news on highest foreclosure rates in over a decade and an apparent bubble bursting effect.

Real estate, like any form of investment, has cyclical patterns that are dependent upon supply and demand. Good real estate market cycles attract developers and speculative buyers. Optimism kicks in and both buyers and developers exuberance results in over building and buying, resulting in excess "for sale" inventory. Simple economics indicate that supply must be equal to or less than consumer demand otherwise prices will fall to attract more buyers. Qualified buyers hear local news reports indicating that prices are falling and many wait to see a bottom before executing a purchase, therefore exacerbating the situation further.

Market Bottom

A market turnaround can only occur when the excess inventory is consumed by: 1.Institutions (banks, lenders) that can weather a market correction. 2. Property is bought by financially qualified buyers. 3. Current property owners are financially capable of holding property for a longer period of time. There is a silver lining to our current real estate cycle. 2008 will mark the bottom of the real estate cycle in the vast majority of all U.S. regional markets. One of the best indicators to demonstrate a bottoming is the recent news reports of high foreclosures by lending institutions. A foreclosure is always the last result for any property owner. Foreclosures are a sure sign that property owners have hit bottom, so much so that they find it necessary to give up the property. This is not to say that a new booming market cycle begins. But it is an excellent indication that it cannot get any worse, thus a bottoming.

Locating Market Bottoms

New markets are already starting to emerge that produce optimal results for investors and homeowners alike. However, not every region moves at the same pace. This is when it is important for any property buyer to investigate their regional buying are to find out whether it has already bottomed. The only way to accomplish this is through understanding the regional real estate forecast in your area. Experienced investors know the importance of measuring market trends and are rarely caught with undesirable properties during a market decline. Unfortunately most average investors and homeowners are completely unaware of how to do this. There really is no reason for this to happen since many resources now exist to help you measure market trends. It is far simpler and less expensive to know a regional market trend since the advent of computers and the internet.

Managing Real Estate Trends

Investors realize faster returns under any market condition so long as they can learn to manage and calculate the timelines that produce equity and cash flow gains.

The rewards from sound real estate investing are tremendous. Real property has been and will continue to be the single most significant source for creating individual wealth in the United States. Perhaps one of the most important reasons for these results is that most people make their real estate wealth while sleeping. Property holders see incremental returns in value over time with little or no effort. This is what is referred to as appreciation in your asset. Almost every investor knows that this is the most compelling reason to invest in purchasing real property. What is amazing is that the majority of homeowners fail to calculate their expected returns from appreciation before executing a contract to buy a specific property. Instead, time and time again, buyers purchase with an expectation of both short term and long term appreciation without any sound technical or economical guidance. This in itself is not catastrophic since we all know that given enough of time the property almost always appreciates over the long run. But during an economical real estate slow down many regions may receive years of negligible appreciation and possibly even declines in values.

Would it not be wonderful to take the extra time to project how much time the appreciation will take and the amount of money you plan to make on every property?

Even when putting a bet on a table in Las Vegas we all have expectations of how much return we are expecting if we win. Or even a better example is any state lotto. Each store posts how much the current "pot" of earnings which is expected to be distributed to the winner. Sure there is no guarantee that you will be the winner, but at least you know what to expect to win.

Now lets apply this to purchasing a property. Many of you have already bought your first property. Did you have an exact number for appreciation over the first five years of ownership? Estimating your appreciable real estate returns over the short and long-term does not need to be a cumbersome or difficult task. In fact once you are armed with a few tools it can be as simple as calculating your lotto returns.

Taking the time to understand the dynamics of current economic conditions and applying the results before making an offer to purchase a property can and will yield you greater financial returns. All forms of financial investing (stocks, bonds, time-deposits) include a component of estimating the expected gain over time. Measuring your expected returns can and should be a fundamental part for anyone interested in real estate. There is no reason for anyone to be caught with unwanted property during a market slow down.

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