I just wrote this post on my web page blog. It was or is entitled: Emerging Markets. The relevance to the real estate market and agents in particular doesn't come into play until the last two paragraphs. I think it is highly relevant and recommend it to all, just be patient as it will congeal near the end in what I expect will be interesting at the very least. It's my version of "the glass half full" theory!
After reading an article on emerging markets, it brought me back to the days when I was immersed in finance rather than the internet. The article simply talked about what an emerging market is and what nations best supported the thesis that they were to join the ranks of a new emerging market. The article was of some interest. Then I come to learn that one of the trending topics according to Yahoo is emerging markets, so I sauntered over to see what the entire buzz was about. Not much buzz after all. I couldn’t figure out why it was on the list.
While pondering that and other questions surrounding emerging markets, I had an epiphany of sorts; in some way, every market is an emerging market when you break it down to its core. For example Wikipedia provides a definition of emerging markets as:
“In the 1970s, "less economically developed countries" (LEDCs) was the common term for markets that were less "developed" (by objective or subjective measures) than the developed countries such as the United States, Western Europe, and Japan. These markets were supposed to provide greater potential for profit, but also more risk from various factors. This term was felt by some to be not positive enough so the emerging market label was born. This term is misleading in that there is no guarantee that a country will move from "less developed" to "more developed"; although that is the general trend in the world, countries can also move from "more developed" to "less developed".
Makes sense . . . right? Then I realized that even in a market that is mature (having crossed from the emerging to highly developed) there are parts of that market that are developing. Take for example the US market. Surely we are a mature market overall but when you begin to slice the US into parts, some of those parts are emerging toward developed stage. That made me think even further about the concept of emerging markets.
Certainly, if a market was once highly developed, then gets decimated, and knocked back down to near its infancy stage, wouldn’t that set it up for a future emerging market possibility as long as that industry was not going to disappear, but rather that industry had simply experienced a pull back? The answer is maybe, most likely, yes.
In the past, the best time to purchase the broad market indexes of nearly any major economy was when there was a large pull back. Remember October of 1987 – the US market per the Dow Jones Industrial Average fell over 500 points one day – a very troublesome event in most investors eyes. Yet those investors who stepped up to the plate and purchased stocks that day and the days following, were later rewarded for their insight and wisdom.
Where else does this type of scenario exist? It exists in the real estate market in certain regions of the US. I always found it peculiar that the real estate industry itself always promoted buying real estate after their markets had pulled back the same way, with no changes . . . ‘buy real estate because it’s the best investment you could make and everyone needs a home.’ Or variations on the same theme. I remember over the years thinking – how primitive, these folks need a new line of thinking. And I’ve got one.
For so many years it was true: purchase a home and eventually its value will increase and make you money. After the most current collapse and all the short sales combined with the foreclosures, people are suspect. And they are suspect for good reason. The age old advertisement mentioned above won’t work today – because in part it’s not relevant. However, the analogy to the stock market story will, and it is relevant.
My point in all of this is simple: if a major market once coveted by investors and the public alike, takes a major pull back in terms of its overall value, and it appears that this market is not about to vanish, then purchasing assets of that market after a pullback would be a prudent thing to do.
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