I am sure you've heard the expression, “Attitude is everything.” This is very true. Right now, it's simply your attitude and mentality that will give you the edge over others who are trying to invest in real estate in this highly volatile market.
You've undoubtedly heard the importance of thinking positive and having the right attitude. Most people are intelligent enough to know that this statement is true. Some people reading this will argue that a positive attitude doesn't always work. Well, maybe not, but I know one thing for sure – negative thinking and a negative attitude NEVER works! So your only choice and your only chance for success in this market are to pick the positive things in life and maintain a positive attitude at all times.
I once read a fortune cookie that said, “An optimist is someone who tells you to cheer up when things are going his way”. I know that if you are reading this article, times may be difficult and you need serious answers to your burning questions such as, “How do I profit in a slow market?” There are many answers to this question, but first I need to impart to you some relative perspective.
A History Lesson on Real Estate Cycles
About every ten to twelve years, as an average, real estate values tend to double in most major metropolitan areas. For example, in the 1920's, the original colonial homes sold for just under $2,500 in Long Island, New York. Since then, real estate prices have doubled almost eight times over the last 80 years. That averages out to a 100% increase approximately every ten years. An interesting note to this is that about every ten to twelve years, real estate values must correct before they enter their next “doubling cycle”.
It's Not a Matter of If, It's a Matter of When
The evolutionary process is three steps forward and one step backwards. For example, imagine a 100% increase occurring in three steps of one-third parts each. The last market cycle of the 1980's was one in which real estate values doubled, followed by a correction of the early 1990's, which equated to a 20-30% decrease over a three to five year period. This cycle was then followed by the post-millennium cycle boom of 100% from the last high point of the previous cycle. We are now in the naturally-occurring phase of a correction in the cycle. This essential and beneficial adjustment gives the market pause to reflect and re-gather momentum and strength for the next doubling cycle. This has occurred time and time again because the long-term demand for housing is growing at an exponential rate based on population growth to almost double in the United States by 2050. This will continue to drive prices higher as it has for the last 100 years.
Maintain a Positive Attitude Assuming a Negative Result
In “Winning Through Intimidation” author Robert Ringer talks of the importance of maintaining a positive attitude through the assumption of a negative result. In other words, Ringer suggests that you be prepared for the worst case scenario while at the same time putting your best foot forward to get the best possible result. This will take the mental pressure off of you and allow you to focus on getting the job done. This approach, I believe, allows you to be positive and realistic in your mental assessment when buying and selling houses.
If it Bleeds, it Leads
There's an old expression in the media business, “If it bleeds, it leads.” In other words, the media loves to cover negative news more than positive because it sells better. When the real estate market is in turmoil, the media loves to run these negative headlines to keep reminding people how bad things are. When buyers hear the bad news, it affects demand because the negative news drives fear, which makes buyers worry about whether the time is right to buy a home.
Is the media simply reporting the news or does the media actually affect the news in this regard? The answer is obviously both. The media reporting negative news alone can't shape a real estate market. However, since perception is often reality, when buyers are spooked, they may shy away from buying. This affects lenders, builders, real estate agents and other professionals who rely on the real estate business for their income. It becomes almost a self-fulfilling prophecy because things get worse and the media again reminds us how bad things are.
But, are things really as bad as the media reports? At the time of this article the numbers certainly do reflect falling home prices and rising foreclosures. When you hear that foreclosures have doubled or even tripled in a particular area, this may sound catastrophic at first until you realize that the vast majority of homes (97-99%, depending on the local market) are NOT in foreclosure. Despite the doom and gloom, there's always a buyer for a well-kept home offered at the right price and terms. In short, don't read the paper if you want to keep a positive attitude!
Ready, Fire, Aim, Fire
Don't focus too much on perfection before you take action. You're probably familiar with the phenomenon of the “C” student who outperforms the “A” student in real life. This is because the “C” student is often satisfied with doing a mediocre job at something, but just getting it done. The “A” student mentality often leads to paralysis of analysis and inaction.
Taking the time to learn what to do is a very important part of success. In the classic book “Think & Grow Rich”, Napoleon Hill writes about the importance of learning the right things. He distinguishes between general knowledge and specialized knowledge.
Many people reading this are prone to inaction because of fear of doing things incorrectly. Remember, it's not a matter of doing it perfectly, but putting forth your best effort. As I discussed earlier, a lot of effort at a “C” level beats doing less at an “A” level.
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