Peep. So someone asked today, how could a property purchased in 2008, as a residence, be underwater in value today. Easy. And it’s a lesson on why several things matter if you’re buying for appreciation (ie buying a primary residence that doesn’t generate income). 
Note that this chart is adjusted for inflation, which is why the 2019 values look lower than last peak levels. What I want to illustrate in this chart is why buying at the right price is so important and how timing can play a large role in how well an investment does.
Everyone likes to say that bs line, “you can make money in any market”. It’s easy to say that looking at the play in the rear view mirror vs when you’re in the present trenches. If you look at ‘08, the real estate market dipped and many people thought it was a good time to buy.
What they didn’t realize is that ‘08 was far from the bottom and, quite frankly, not even that far off of 2006/2007 levels (see above chart). While different city market performance varied, across the nation, most areas saw a BIG dip around 2011-12.
The folks who got hit the hardest were people who bought in areas where prop taxes were MUCH higher than surrounding counties, heavy new construction areas (due to excess inventory) and new construction condos in the suburbs. Nailed.
It’s also important to note the stock market plummeted in ‘08 and bottomed in ‘09. Real estate didn’t plummet at the same time. The steepest declines in RE came 12 to 24 months after the stock market bottomed, depending on the city.
Here’s where timing is important. If someone purchased a primary in 2008, where the market was not too far off of the real estate peak in 06-07, and they were in a high tax market (relative to nearby counties) many of them either foreclosed yrs ago or are now selling at a loss.
It’s important to buy right, esp after a massive market swell. I’d avoid the following:
1. High RE tax markets (assuming there’s a county in driving distance with much lower taxes).
2. I’d stay away from new construction unless you’re buying the land and building yourself.
1. High RE tax markets (assuming there’s a county in driving distance with much lower taxes).
2. I’d stay away from new construction unless you’re buying the land and building yourself.
3. In 2020, I wouldn’t be buying someone else’s sweat equity. I’d be leery of buying a fully rehabbed house unless by some act of God you are miraculously getting a deal so good you feel low-key guilty at closing. Put your own sweat equity in to avoid paying a premium.
4. Avoid bidding wars at all cost unless the property is deeply priced below market value.
5. If you’re buying a primary and may need to relocate or sell in less than 7 years, you’d better be prepared to be a landlord if need be and the mortgage needs to be well below avg rents
5. If you’re buying a primary and may need to relocate or sell in less than 7 years, you’d better be prepared to be a landlord if need be and the mortgage needs to be well below avg rents
