Ok I’ve had just about enough of this. This article in USA Today has just about pushed me over the edge. It’s no secret the housing market is in a long anticipated glut. The media is pulling no punches in helping cause widespread panic in the housing industry which brings me to my point.
In every financial market there is what is called a cycle. Every economist knows this and after a little self education, I have learned to accept this as a vital part of the capitalistic system we live in. What really drives me nuts is the perception that the rest of the country is full of a bunch of bumbling idiots. The powers that be want us to truly believe in our system and that the so called ‘cycle’ is business as usual. I would have accepted that if it wasn’t for Alan Greenspan. Watching him manipulate interest rates to curb inflation and actually fuel our real estate boom taught me a valuable lesson. Our governing bodies along with the media actually control the ‘cycle.’ How can I make these accusations you ask, easy what is the number one priority of this country? Freedom? Nah. Safety of our citizens? Nah. Democracy? Nah. How about to retain the title of richest country in the free world?
Case in point with every market condition someone stands to make money. In a recession who stands to make the most? That’s right those who have the most. Catch a cycle on the way down and you make the most money. Problem is most people catch the market on the way up, get greedy and stay in too long. People were made rich by investing and liquidating assets over an over again during the real estate upswing, which in turn helps the economy because more people have more to spend. Now those who stayed in too long are stuck with depreciating assets. If you have the resources (liquid cash) you might be able to ride it out, if not you have to settle for a loss. The bad times have to take place in order to have the good times.
Those who know enough about investing invest for long term. This protects against what is happening today in the real estate industry. Even if prices drop to 2001 levels will it really matter in 2027 if you still own the asset? The only real loss is an opportunity loss. You can’t lose any money if you haven’t sold anything. Depreciation, yes. Loss, no. If you believe in our great system then you know that what follows is a recovery period followed by, yep you guessed it, another run up. We probably won’t see another market like the one we were in, but I’ll take that old traditional appreciation of 6%-10% per year market any day. It’s more stable and easier to invest in and valuate real estate. It’s also easier to spot something that’s overpriced and avoid it altogether.
My advice is if you didn’t buy at an extreme bargain this past year then you might have to wait about another 18-24 months for things to stabilize. If you try selling now then you most undoubtedly will loose money. If bought at the beginning of the upswing and try selling now, understand that you lost opportunity and you still stand to make a profit if you sell now, just not as much if you would have sold last year. The amount of profit depends on the part of the country you’re in.
What I think slipped passed our great leaders, is that with the appreciation of home values comes higher tax bills and insurance rates. Then again, there’s money to be made writing new policies and collecting higher taxes. Will it ever end?
Noel Padilla
'Doing Business Right'
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