Bubble or No Bubble?

A few months ago, I read a very discouraging and equally damaging article in “Fortune Magazine”, giving a very generalized overview of the real estate market. The discouraging and damaging part is that a lot of non- real estate practitioners would read this article and take it as a true reflection of the real estate market.

And in my opinion, this is what the media wants: a diversion from the real estate market towards the stock market.

The truth of the matter is, that people do suffer from very short memory span and they do forget the raise and the fall of stock market and the FACT that any real estate investment will undeniably be a much safer harbor then any stock market investment. Plus, definitely with a much greater return over time!

We do see a problem here in Southeast Florida, with the higher end condo market,which seems to be bustling with inventory; however we do need to remember that land is very, very scarce here and agents, keep this in mind! There will be no such thing as prices going down, as ridiculously predicted by Fortune magazine.The prices of real estate in South Florida have never gone down; however risky speculations in real estate by un-savvy investors (brainwashed by the media) have lead to downfalls.

The trend today: if a home is priced correctly, listed with a capable agent and at a full price commission, it will sell. The sellers might have to considercreative financing for the buyers with the full price offer, to help in this market which is stressed by the higher interest rates, but make no mistake, if you are on the market for a single family home, anywhere east of I-95, prices will not go down, instead they will continue to go up, maybe at a slower rate.

Fortune Magazine showed some statistics that looked so convincing to the eye, yet one really has to read this article again and again and go back in history, and then, read the whole issue again. Here is why: according to Fortune Magazine’s here are the following definitions of the national real estate markets today:

1. Dead Zones: BOSTON, LAS VEGAS, MIAMI, NORTHERN VIRGINIA, PHOENIX, SACREMENTO, SAN DIEGO;

2. Danger zones: CHICAGO, LOS ANGELES, NASSAU/ SUFFOLK COUNTIES, NEW YORK, OAKLAND, SAN FRANSISCO, SEATLLE

3. Safe Havens: CLEVELAND, COLUMBUS, DALLAS, HOUSTON, KANSAS CITY, PITTSBURGH.(And just before this article, one reads 19 pages of advertising for the new Kansas City, totted in this article as a “safe harbor” )

One can help it, but wonder: was the perfect timing with this article in the same issue a coincidence? And last, but not least: ever wonder why the coastal regions, especially coastal regions, enjoyed such unprecedented growth during the last 10 years?

Was it the risky nature and the unpredictability of the stock market? Or, was it September 11 that contributed to the later growth? Or, maybe it was Alan Greenspan’s attempt to “spark” the economy after the market crash in late 2000 by cutting the Fed funds rate from 6.5% to 1%?

All of the above for the national growth in real estate. And one more that directly contributed to the growth in the coastal regions, and this is contributed to technology! Yes folks, since the time that technology made a joke of geography, most affluent business owners, created virtual offices and went on and settled down in “paradise”, life on the beach, with palm trees, boats, unbeatable lifestyle and all. Let’s be honest here, it is rather tempting to contemplate life on the beach in mid February, when you are trying to uncover your vehicle buried under a pile of snow.

So, in a nut shell: “technology made a joke of geography” is one of the key elements here. In conclusion, I think that NAR has to come up with a strong and powerful campaign to educate the consumer that real estate investment will always be the safe harbor, no matter what!

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