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WHERE ARE TODAY'S PRICES AS COMPARED TO THE "BUBBLE"?

In my monthly real estate meetings, where I inform consumers about real estate in general, markets, prices, trends, etc… I showed the members that prices are not yet at the highest level they were in 2007. Most of them thought, because the market has gone up a lot since 2010, that we have another bubble. 

So here is what you can do to show the misunderstanding:

1. take a specific zip code
2. look at the average sales price for a period in 2007, and for the same period in 2014, for a single type of real estate (I used SFR).
3. Look at the inflation between 2007 and 2014
4. add inflation to the 2007 prices
5. you will see that you are not even close the those prices today.

Furthermore, when you express "price" in terms of buying power, use a 6.25% mortgage rate for purchases in 2007, and use 4.25% in today's market. It is an enormous difference, clearly showing that consumers today have much more buying power than they used to have in 2007.

And with no signs that interest rate will come down, and with no sign prices will come down, (on the contrary) buying today makes still sense. Make sure you also analyze the rent vs buy option. And from a financial perspective, I would even say, borrow as much as you can afford, because 3 years from now, 4.25% will seem ridiculously low. I paid 9.5% in 2010. You remember that time??


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