In 1981 the real estate market bottomed out, it has risen nicely since hasn’t it?
Doom and gloom filled the news in 1981. It was “the end of the American Empire” the media trumpeted. Things were ‘different’, recovery unlikely. Real estate values ‘may never come back’. Property as an investment, or even as a hedge against inflation, was seen as a polly-ann-ish notion.
What has history proven to you since 1981?
Dr. Shiller, an economist, makes a strong case that homes were overvalued, and may still be overvalued, but he goes further to suggest ‘that prices will NEVER recover’. This, I believe, is the pendalum swinging too far again, over-reacting, chasing the sheep in a panic.
“A bet against America, has always proven to be a bad bet!”
As I have watched property values decline in the last 9-months Nationwide (almost 5 years here in Detroit area), I have reflected on a conversation I had on an Aspen ski lift a couple winters ago (Aspen’s values are even higher today than they were 2 years ago), here is an excerpt from my book “Besting”:
“Ajax, Aspen Ski Lift – The Single Best Decision
Harvey and I met on a ski lift last January (2006) in Aspen. It was my 5-day ski trip, as I was basking in the sunlight and snowfall, I asked him “where do you live?” He said Aspen was his home. I explained how much I loved his town, and that I could not believe how expensive the housing was (last season they crested $2,000 per square in values, one of the most expensive markets in the USA).
Harvey explained to me he had owned and ran a successful business, that he had done well for himself and his family, but he made one financial decision in his life that far out reached all his other decisions. “In 1970 I inherited a little money, and borrowed as much as I could and bought a $300,000 home in Aspen, I saw it as an investment in my family’s enjoyment. Never really thought about the money, other than the expense.” He went on to explain that today this home was worth over $5 million, and he had long since paid off the original mortgage. That he was financially secure because of this single decision.
I asked why wouldn’t he sell it, and move to a lesser home down the road, pocket the cash – invest it? He explained for the remainder of the ride up Ajax Mountain that he was tempted many times to do just that, but then “he wouldn’t get to do this everyday.”
Will you wait and miss your dream opportunity too?
One Comment
Hey Bob,
What a great story to share with all of our clients who are waiting for the “bottom” to finally arrive in real estate prices. In the Caribbean and San Francisco Bay Area, the bottom was months ago. The BIG issue for any buyer should be what are interest rates going to do in the future. Our bet is UP. Look at the Bond market, Treasuries, LIBOR, etc. and see if you don’t agree. That is the topic that will have the biggest impact on monthly payments for the next year or so. Sellers need to become Buyers as soon as possible so they can take advantage of a GREAT market.
Post a Comment