David Baldwin

All too often people forget that the health of the real estate market is a matter of perspective. Someone who purchased a home at the peak of the market a couple years ago would think the market is terrible right now while someone who purchased a home 30 years ago can't believe their home has appreciated so much! If your home appreciated in value by 200% then backslides by 10%, you still made 190%!

Real estate is not a short-term investment, yet it is being treated like one by far too many buyers and sellers. Thanks to the internet, speculators can now find and purchase a home almost as easily as buying a stock. Don't get me wrong; I think the internet is a great "tool" for buyers and sellers, but buying a home should not be taken lightly. People who purchase long-term investments and treat them as if they are short-term will invevitibly get burned. Real estate is really not a very good short term investment anyway. It is not very liquid and transaction costs are relatively high.

People seem to have short memories when it comes to markets. Have you ever noticed how the life of the housing market seems to have begun on the day a buyer gets their home. It is as if the market did not exist in their mind before that point. At the recent peak of the Treasure Valley market, speculators were rationalizing their purchases saying things like: "Boise has finally been discovered and this growth is just going to continue." The truth is, Boise has been "discovered" and rediscovered many times. Boise has experienced several growth spurts over the years. As you can see from the following graph, Boise experienced a huge growth spurt in the early to mid '90's. There was a smaller one in the mid '80's.

I wonder how many of the speculators who purchased a couple years ago saw a graph like this one that showed the growth off the charts in '05? Would it have made a difference in their buying decision? Probably not, because it goes against human nature. Instead of buying low and selling high as they should, it is human nature to follow the pack, buying when prices are going up and selling when they are going down.

Has the Treasure Valley market bottomed out? Only time will tell and we will only know it in retrospect (after the fact). If you are considering buying or selling real estate, remember the saying "the money's in the middle." The market may or may not be at it's relative low point right now, but it is certainly lower than it was a couple years ago and there is an opportunity for investing. Just remember that real estate is a long-term investment.