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Phoenix Real Estate Blog: After the Fall – A Must-read for Real Estate Investors
The online magazine Knowledge@W. P. Carey, produced out of ASU’s W. P. Carey School of Business, recently reviewed Steve Bergsman’s “After the Fall: Opportunities and Strategies for Real Estate Investing in the Coming Decade.” I haven’t read the book yet myself, but I will -- Knowledge@ certainly makes it sound like a must-read for anyone involved -- or thinking about getting involved -- in real estate.
Some of the most salient points from the Knowledge@ story:
• “‘Although that (late-'80s) recession was different in that it was led by commercial real estate overbuilding instead of residential real estate over-lending, essentially when it comes down to it, we are talking about the same thing: too much liquidity in the system, which over-stimulates investment and drives up values falsely,’ Bergsman writes.”
• “‘When flipping starts, the investment market begins to take on all the characteristics of musical chairs, except in the children's game when the music stops, the last child sitting is the winner. In the flipping game, when markets collapse, the last investor sitting or standing is the loser.’”
In other words, a market in which an investor can buy a house one month and sell it several months later, without having made any changes, for tens of thousands of dollars more is a fundamentally over-inflated market -- a market that is bound to crash.
So what’s the lesson? The lesson is not that investing in real estate is a fool’s game. The lesson is that real estate investment is a long-run (or at least longish-run) proposition. Think about a five-year time horizon, at least, when thinking about how long you’ll have to hold a home as an investor until you can make a good profit reselling it.
And, Knowledge writes, “Bergsman injects perspective,” -- just the kind of perspective I’ve long been blogging about -- “ noting that single-family sales rose from a respectable 5 million annually in the late '90s to a record 7.5 million in 2004, then sunk to 6.5 million in 2006 and about 5.39 million in 2008, which is still historically respectable.”
What do you think? Have you read “After the Fall”? Click on the “Comments” link to join the discussion!
Some of the most salient points from the Knowledge@ story:
• “‘Although that (late-'80s) recession was different in that it was led by commercial real estate overbuilding instead of residential real estate over-lending, essentially when it comes down to it, we are talking about the same thing: too much liquidity in the system, which over-stimulates investment and drives up values falsely,’ Bergsman writes.”
• “‘When flipping starts, the investment market begins to take on all the characteristics of musical chairs, except in the children's game when the music stops, the last child sitting is the winner. In the flipping game, when markets collapse, the last investor sitting or standing is the loser.’”
In other words, a market in which an investor can buy a house one month and sell it several months later, without having made any changes, for tens of thousands of dollars more is a fundamentally over-inflated market -- a market that is bound to crash.
So what’s the lesson? The lesson is not that investing in real estate is a fool’s game. The lesson is that real estate investment is a long-run (or at least longish-run) proposition. Think about a five-year time horizon, at least, when thinking about how long you’ll have to hold a home as an investor until you can make a good profit reselling it.
And, Knowledge writes, “Bergsman injects perspective,” -- just the kind of perspective I’ve long been blogging about -- “ noting that single-family sales rose from a respectable 5 million annually in the late '90s to a record 7.5 million in 2004, then sunk to 6.5 million in 2006 and about 5.39 million in 2008, which is still historically respectable.”
What do you think? Have you read “After the Fall”? Click on the “Comments” link to join the discussion!
Tags: after, agent, arizona, bergsman, bubble, crash, crisis, economic, economy, estate
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