With the shortage of homes throughout America, the large number of residential lot sales that are currently taking place in our market area, our robust economy, and what is statistically happening in the financial markets, we believe our land values will see a rapid increase in both demand as well as price. If history repeats itself, those who continue to have a little patience will benefit from this upswing.
From all Indications 2018 Will Be a Stellar Year for Home Sales
We realize we have held onto some of our partnership assets much longer than projected. Likewise, there are a small percentage of investors who have lost faith and don’t want to contribute to any further capital calls. There are some who have even given up on land as being a good investment. Unfortunately, these few are now, more interested in selling at an approximate break-even price rather than take the risk of waiting for prices to rise.
In every decade since the mid-70’s, we have seen the same thing happen time and time again. We have been here four other times as we struggled through various recessions. Each time, due to fear, we have sold one or more properties, early into a recovery, only to see the buyers enjoy the significant price increase that took place in a very short period of time following the sale. It’s frustrating to see others take advantage of our years of work and patience.
On the flip side, we have also participated with those investors that continued to have a little patience and have seen us all benefit significantly. We didn’t wait to find the top of the market because none of us have a crystal ball but we did allow the upswing to mature. We, at Rancon, are at a crossroads. Do we sell out at today’s market value, just as momentum begins to build, and move on? Or, do we have a little patience and allow the upswing to mature?
Land has always been the foundation of wealth because it’s real and tangible. As Will Rogers said, “They ain’t making any more of it.”
From the first recession we experienced in 1974 to 1976, then from 1981 to 1984, on to 1990 to 1995, and finally in the early 2000’s, we have observed a definite pattern.
1. You can sell early as the market starts to rebound at a break-even price.
2. Be patient and give yourself six months to a year allowing prices to increase.
3. Try to estimate the market peak and sell.
We are recommending to sit tight for six months to a year and then sell. Yes, we risk that we could be in a very short upswing and miss our opportunity to sell and that would be the risk we take. But, financial indicators are not seeing the market that way. The other question we must ask ourselves is if we sold now, at break-even prices, what would we invest in? If you have an opinion, we would love to hear from you.
S&P/CoreLogic Case-Schiller Home Price Index Was up 6.4% Over Last Year
The S&P/CoreLogic Case Schiller Index serves as more of a reinforcement than anything else. We already know that home prices remain elevated and are moving higher based on reports on new and existing home sales. The price index simply tells us that the gains are widespread and growing. Coupled with housing starts and existing home sales from the end of 2017, it looks like 2018 could be the year that real estate breaks out to the upside. If home builders switch their focus from upscale, mid-market homes to entry level models, we could see big gains in the number of units sold next year.
The stars are in alignment for the Inland Empire to benefit from both increasing home prices, as well as increased construction that the coastal regions have already benefited from over the past several years. To the benefit of our investors who own land, these increases will certainly improve land values and the demand for lot sales.