Monthly Archives: January 2009

I receive regular emails from my financial stock broker with various regular reports from the brokerage’s experts. The expert that I usually read (in these emails) writes on the current economical issues. I’ve been finding that I’m less likely to read his opinions recently, since reading MORE economical news just gets too depressing.

I did happen to start reading this expert’s latest report and noticed what I believe is a part of the problem when we hear media reports on the real estate industry. He gave some statistics on housing prices, mortgage rates, and then provided data from a Business Week poll. Per this writer, the BW poll asked, “If you had to choose the one investment that you think would be the best to make right now, what would it be?” According to the survey conducted from Nov 20 to Nov 25, 2008, real estate ranked No. 3 at 12%. No. 1 was common stock (24%).

What’s wrong with this picture?

The problem, as I see it, is the word “investment”. Speculators INVEST in real estate. The speculators caused some of the problems with home prices and inventory in places such as Florida, where they bought and flipped, possibly earning a 10%-20% return on their money. When interest rates increased, lengthening the time on the market and reducing the price, these speculators looked for other areas that would provide better short-term earnings for their money. This left builders with excess inventory that had been built to meet the speculators’ demand, and of course, prices began to free-fall. The builders made a mistake in building to meet speculative demand rather than homeowner demand.

Speculator ≠ Homeowner

The people that I sell homes to or for, are buying a home to LIVE IN, to raise their family, to entertain their friends, to have a comforting place to come home to at the end of the day. They’re in it for the long-term enjoyment and lifestyle. Sure they hope that when they do decide to sell that they will at least not lose their equity, but they’re not buying it as an investment the way they would buy stocks. If after they’ve lived in the home ten years and they walk away with a nice deposit on the next home, that’s great. They don’t buy a home looking for a specific annual rate of return. They’re not flippers.

Slow and steady wins the race

I doubt that Central Ohio has ever been a speculator’s chosen market for quick flipping, as our prices tend to follow inflation rates, with perhaps, some suburbs doing a little better than inflation rates with their price increases. Now if we could just convince the media and the “experts” to make a distinction between stock investing and home ownership, we might just improve on consumer confidence and reduce the fear that buyers may have from taking advantage of the very low interest rates that are available to them now. 

Of course, if people can be convinced to put their money in the low prices that exist now in the STOCK market rather than putting it into a home, I wonder who would benefit? Hm-m-m-m-m! Yes, we ALL put our own spin on things, don’t we!

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