real estate investing

By Rick Tobin

Is it better to let your money work hard for you or for you to work hard for your money? For most people, the answer would be that they’d want their money or investments to grow and compound each year so that the investor could enjoy life and travel or sleep more.

The Social Security Administration released their final wage statistics for employed workers across the nation for 2023. As per this latest published report for annual wages, the “median wage” in the U.S. was just $43,222.81. If true, this means that half of Americans made less than $43,222.81 in 2023 while the other half made more than this annual income amount.

“Based on data, about 67.6 percent of wage earners had net compensation less than or equal to the $63,932.64 raw average wage. By definition, 50 percent of wage earners had net compensation less than or equal to the median wage, which is estimated to be $43,222.81 for 2023.”
– Social Security Administration

article continues after advertisement

Equity Gains and California Dreamin’

“If you don’t find a way to make money while you sleep, you will work until you die.” – Warren Buffett

The average annual home appreciation rate in California over the past 39 years is 6.77%, as per sources like the California Association of Realtors (CAR).

Earlier this year in 2024, the average California home price statewide surpassed $900,000 for several consecutive months. This was more than double the national home price average closer to $428,000 that was reported for September 2024 by Redfin.

To simplify the math, let’s use the $900,000 California home value average and multiply this same home price number by the 6.77% average annual home appreciation percentage rate over the past 39 years.

$900,000 home value x 6.77% annual appreciation = $60,930 in potential future equity gains if future value percentage gains maintained the same 6.77% historical pace.

While there are no absolute guarantees for real estate and life, the fact that the average California homeowner might’ve collected more than $60,900 when they were literally sleeping part of the time is quite impressive. If so, this $60,930 annual equity gain was much higher than the $43,222.81 median wage income average for U.S. workers.

Whether the skies around you are blue or gray, it’s time to take more walks around your neighborhood to find the next great housing investment deal.

All the leaves are brown (all the leaves are brown)
And the sky is gray (and the sky is gray)
I’ve been for a walk (I’ve been for a walk)
On a winter’s day (on a winter’s day)
I’d be safe and warm (I’d be safe and warm)
If I was in L.A. (if I was in L.A.)
California dreamin’ (California dreamin’)
Music video: California Dreamin’ by The Mamas & the Papas

Good or Bad Times in California

Is time the most valuable and precious commodity of them all? Life is too short for us all. Many people who invest in real estate, stocks, insurance vehicles, bonds, gold, silver, or other investments just want to create more free time to spend with their family and friends instead of being forced to work until they die.

The varying degrees of real estate wealth creation is directly affected by a few different things or factors such as location and time when the property was bought or sold. Since 1977, home appreciation in California has far surpassed the cost-of-living inflation increases two-thirds of the time.

Timing is key when you buy and sell your home for profits. For example, a California home purchased in 1990 and later sold in 2000 would’ve resulted in a net loss. Conversely, a home purchased in 1996 and sold 10 years later in 2006 near the peak of the last major housing bubble in both California and the nation would have resulted in a significant price gain.

Let’s take a look below at how statewide home values or median home sales prices either increased or decreased for a specific year in California:

article continues after advertisement

Between 2008 and 2012, California home prices fell to a still all-time state record loss of -41.7% from peak to trough. However, California home prices skyrocketed more than any other region in the entire 2010 decade, starting shortly after the housing market bottomed in 2012 or 2013, depending on the region.

There’s no other state in the nation that has experienced such extreme home price swings from low to high in a relatively short period of time than California, for better or worse. In spite of falling more than -41% within four years (2008 to 2012), California home prices still rose a net gain of 120% between 2010 and 2020, which was double the national average.

Life is Short, Invest Today

The sooner you start investing in real estate, the more likely it will compound and grow over time as the home value may double or triple while you pay down your mortgage debt until the home is later free and clear.

A few decades ago, it was much more common for young college graduates to marry and start having multiple children in their early to late 20s. Additionally, these same young families followed their heart and grabbed a piece of the American Dream by buying their first home.

In more recent years, housing has become so unaffordable and fewer people are choosing to marry or have children, partly due to how expensive it is to raise children these days, that the average first-time home buyer age and the overall age of all homebuyers nationwide have reached all-time record ages.

Between July 2023 and July 2024, the average age of first-time buyers rose from 35 to 38, and from 58 to 61 for repeat buyers.

The average age of all U.S. homebuyers reached an all-time record high of 56 years of age in 2024, according to the National Association of Realtors and Yahoo! Finance. By comparison just one year earlier in 2023, the average U.S. homebuyer age was seven years younger at 49.

Please note again that California home prices tend to be more than double the national average, so it can be more challenging to purchase here. Yet, rents are significantly higher here in our state too.

If you can set aside a few thousand dollars or more or have family members “gift” you some funds, you may still be able to purchase a home in California or across the nation that has a monthly mortgage payment similar to what rent is these days for many tenants.

The average age of a U.S. home seller in 2023 was 60. For many of these homeowners, they probably bought their home 30 years earlier at the age of 30 when they borrowed a 30-year mortgage.

Either way, your monthly housing payments will make someone wealthy over time whether you rent or own. Homeowners are 40 times wealthier on average than tenants as I’ve shared before in past articles.

It might as well be you who creates wealth while you sleep, so please create a plan and take action sooner rather than later as your future nest egg is depending on you.

Rick Tobin

Rick Tobin has worked in the real estate, financial, investment, and writing fields for the past 30+ years. He’s held eight (8) different real estate, securities, and mortgage brokerage licenses to date and is a graduate of the University of Southern California. He provides creative residential and commercial mortgage solutions for clients across the nation. He’s also written college textbooks and real estate licensing courses in most states for the two largest real estate publishers in the nation; the oldest real estate school in California; and the first online real estate school in California. Please visit his website at Realloans.com for financing options and his new investment group at So-Cal Real Estate Investors for more details. 

Learn live and in real-time with Realty411. Be sure to register for our next virtual and in-person events. For all the details, please visit Realty411.com or our Eventbrite landing page, CLICK HERE.