Real Estate Market- Fear and Bad Opinions
Fear and Opinions in the Real Estate Market-
As Real Estate Agents in Minnesota, we run across people in our business that think they know everything about the market. Most of the time their opinions are based on something they have read and taken out of context. While popular opinion about the Real Estate Market varies depending on who you talk to, fear and skepticism remain by many. Every once in a while, its important to look back through history and draw comparisons to similar catastrophes that people thought would change the way a particular investment (such as real estate) would perform into the future. This recent report and blog post by Steve Harney of Keeping Current Matters, sheds some interesting light on where we are in the Real Estate cycle. Everyone wants to comment on the current real estate market, but few take the time to understand what has happened, and what will most likely happen in the future.
They want to talk about how now is not the time to buy ahome. Some even argue owning a house has never been agreat investment. Most say it will be a long time before realestate again begins to appreciate. It all sounds so familiar tome. It was just a decade ago that many made the samearguments about gold as an investment.Gold had dropped from over $400 an ounce to $250 an ounce(a 40% decline) from February 1996 to August 1999. People ranfrom gold as though it was a plague.Lord William Rees‐Mogg, the current Chairman of The ZurichClub, in 1997 said:“No investment has been so thoroughly exploded as gold; mostpeople think that there will no more be another gold boom thanthere will be another boom in tulip futures in The Netherlands.”Two years later in 1999, Don Wolanchuk author of the Wolanchuk Report explained:“Everybody hates gold. You can’t have a bottom until everybody is out. And everybody is out of the gold sector.”Everyone knows what happened next. The proclamation of gold’s death was rather premature. Gold rose from$250 an ounce to over $1,400 an ounce in the next twelve years. I see the same situation with real estate today. Iam not predicting that real estate will see the same levels of appreciation. I do believe however that the marketwill rebound strongly.Those who continued to believe in gold as an investment were rewarded. Those who continue to believe in realestate as a sound investment will also be rewarded.Here is what Adam Hamilton wrote in October 2000 in an essay titled Is Gold Dead?The road for gold investors has been long and parched in the last five years. They have wandered through aseemingly endless desert, occasionally tempted by what proves to be an illusory mirage. Many have fallen besidethe sun‐cracked path, their white bones picked clean by buzzards and gleaming in the sun. Nevertheless, a bravecontrarian core continues to march forward.They have studied history, currency, gold, investments, economics, andfinance. They understand the timeless value of gold, the cyclical nature of the markets, and the vagaries of humanpsychology. They realize it is darkest before the dawn, and the journey most difficult right before the homestretch isreached. Gold is in an INCREDIBLE position, and it will have its day. Nothing goes up in price forever, and nothinggoes down in price forever. Investments are cyclical. Gold is NOT dead, it is simply biding its time, waiting for itsnext earth‐shattering mega‐rally. The spoils that go to the few remaining gold investors when that day inevitablyarrives will be fantastic. The stunning victory will quickly blot out the painful memories of the long struggle…You could replace the word ‘gold’ with the words ‘real estate’ throughout this essay and it would apply today.