Love Letter to the Real Estate Market / by Chris Bonner

When I was in college, an economics professor told us a story. The year he got his Doctorate in economics, he thought it would be a good idea to invest in the stock market and put his newfound knowledge to use.  He found a stock that looked promising based on earnings and capitalization and all sorts of logical reasons.  Shortly after he invested in it, it skyrocketed.  He was thrilled.  His research and acumen had really paid off. Then a funny thing happened.  It plummeted to well below what he had bought it for. Turns out, it was Paramount Studios stock and the script for the next Star Trek movie had leaked and the Trekkies didn't like it, so they bought up stock to try to influence the script. When it didn't work, they all sold.

I remember that story whenever I think of markets and how they work.  As the Real Estate market is so close to home for me and my clients, you can imagine I pay a lot of attention to it. And what I love about the Real Estate market is that the product behind the investment has tangible value and the consumer base will always need it.  This is not to say that it doesn't have its ups and downs, but that the market always returns to value, and that value is something you can touch.  It is much less vulnerable to the emotional swings of investors that can get online and click a button or call a stockbroker and sell or buy.  The lack of liquidity of the asset and the fact that it represents (for most people) their home, means it is less volatile.

The latest slowing of some sectors of the Real Estate market has gotten everyone whipped up and caused some distress in those investing in it and those involved in selling it. The best insight I can offer is that it appears that the market is in a "normalization" mode, and simply reflecting the fact that price increases over the last 7 or 8 years have been dramatic, and that wages have simply not caught up.  You can see from the chart that we have blown past the peak prices of 2007 and are safely out of the doldrums of the "Great Debacle" as we call it.

Of course, if you have any specific concerns about the value of your home or investment and want a quick reality check, feel free to call and we can talk specifics.  But otherwise, relax and enjoy the fact that you are invested in one of the best-performing markets in the Nation!