Here is What I Know:
Wow what a ride we have been in lately. It seems that people have been led to question the underlying value of everything financial. I try not to look at my retirement portfolio value and am constantly amazed by the huge swings in the stock indices. With the realization that many companies have made huge bets on financial instruments that even they don’t understand makes one question what actually one owns. Is is the potential future profits or is it the hope that they didn’t make any really bad investments in other companies or contracts? The unknown brings fear and much of what we are seeing at this point is fear of the unknown. Banks and companies won’t lend to each other because they don’t know what skeletons they might have in their closet that would prevent a payback. With so many of the big names going down investors don’t know what is a good company and what is a bad company.
Real estate is certainly not immune from the unknown or from fear. How much value will I lose? Will I be able to sell my house? Will I be able to get a loan? Is this a bad time to sell? These are all questions that are on the mind of consumers right now. Here is what I know. The value of real estate can fall but it cannot disappear. You can use, live and enjoy a house. You cannot get any value out of a stock certificate.
When people talk about a return to quality, I keep thinking about my real estate investments. There may be a few fewer buyers out there right now but without exception everyone needs a place to live. The last few days people have been selling all of their investments and returning to cash (not a great move at this point, remember sell high – buy low). This does not hold true in real estate. Just because there is uncertainty does not mean that you should sell, you still need a place to live. The housing market is a semi-liquid investment, meaning that there are buyers,but it doesn’t happen right away. This illiquidity means overall stability. The national news made a big deal about a nationwide loss of 10% of home values, and this is not true in most areas. The Dow Jones average has lost 10% over the last few days, this is true instability.
All of thee news has scared people into believing that the sky has fallen. Obviously things have changed and we are in uncharted waters but people still need to move. People are still getting married, moving for jobs, getting divorced or having babies. Loans for most of those people (as long as they have a down payment and good credit) are still available. Sales of real estate are down but we are comparing today’s sales to those of the last few years which represented all time records.
Yes you need to be realistic. Yes you may need to be a bit patient but houses are still selling and people will continue to recognize real estate as a stable investment that provides a basic need.
Please call me if I can help you in any way.