Real Estate Profits

Real Estate Profits

Real Estate Profits

Real estate markets perform very differently across the United States. Markets like Los Angeles and San Diego run extremely hot and cold. One year the real estate market might see double digit growth and the next year it might be negative. On the other hand, some markets, like Chicago, ease up and down like a rolling tide. Real estate investors should understand how market dynamics effect the way they invest.

Real Estate Market Volatility

First, consider a highly volatile market like Los Angeles. Over the past 20 years, it experience numerous years of both double digit growth and negative growth. As an investor, holding on to an investment for too long usually has immediate consequences. For example, an investor who purchased a home in 2005 in Los Angeles would have experience appreciation of 13% in 2006; however, if that investor stayed in the market they would have then lost approximately (4%) of the value in 2007. Additionally, if that investor optimistically hoped the market would rebound they would have lost another (25%) in 2008.