S&D VII: Conclusion

Overall, the major Demand Factors that make up the mix are:

1. Interest Rates
2. Flexible Financing Options
3. Population Growth and Trends
4. Real Estate Investors
5. Consumer Psychology

Currently, almost all of these factors have converged which has created the real estate boom we are now experiencing. When you look at these factors on a case-by-case basis, it is clear that some of these trends will continue while others simply can not. Interest Rates will eventually rise and the flexible financing that banks have created may eventually no longer be feasible. An unforeseen terror attack can greatly affect both local and national Demand by way of psychology and a glut of Rental Properties can cause a long-term slow-down as evidenced by England 's current real estate bust, which is approximately 2-4 years ahead of our markets and cause for concern.

That being said, it's easy for professional analysts to insist a Bust is near. While this is logical, it is not necessarily inevitable. Personally, our view is that the Psychological factors have essentially created a new long-term era of Demand that will continue even as rates rise. While the number of transactions will subside, and the real estate employment industry will weaken as a whole, real estate in general will still be in high demand as the underlying psychology which controls our actions have changed.

In this light, we believe the substantial increase in real estate values experienced over the past few years can essentially be called a massive “re-valuation.” Apparently, real estate during the record stock market run-up in 1996-1999 became significantly under-valued as investors focused almost exclusively on stocks and now that our priorities as Americans have slightly changed and real estate has become both DESIRABLE and AVAILABLE, a major revaluation has occurred.

Does this mean real estate will keep going up in value or crashing down? We don't believe either will occur. We've noticed a national market topping effect even in the hottest markets. This leads us to believe that the major revaluation of real estate in general has for the most part occurred. However, we still anticipate strong demand in certain areas(namely the Rocky Mountain states ), certain individual cities whose revaluations aren't done yet and we expect MODERATE appreciation in the near-to-mid term future, which translates to 3-5% annual gains to resume after the softening period.

What does this mean to you as a current or potential real estate investor? Don't be scared but don't fall for the hype either. The sky is not falling and will not be, although markets that have seen tremendous price appreciation, such as California and Florida , are probably no longer the best bets as they pose the greatest risk. Investigate the Supply and Demand factors of the market you desire. Don't expect the same great returns that have been earned in the past 4 years. Invest for the LONG TERM and you will almost always be successful.