Question from a reader:”What do you think of the real estate market a few years from now? There was an article on the web about what property will look like in 2012 and some areas look like they will recover.”
My answer is that I read the same article and like most future predictors about business or a company’s profitable situation, they probably have some of it right and most of it wrong. I will give you my take on the real estate markets at the end of this piece.
You don’t have to be a genius to figure out that people over-react. In business and in their personal lives people get too excited over the good news – “Oh look our stocks are going up. We will always get 25% returns annually on our investments.” People also get too bummed out over the downer news – “Our stocks tanked 59% and they will never recover.”
To be fair, in some cases tanked stocks, if you picked the wrong ones, may never recover. That isn’t to say that you might not make money back in other investments though.
Getting back to the article, it doesn’t take a lot of forecasting to figure out that Los Angeles and California real estate prices might drop for a few more years. The proper questions to ask though are – what if business picks up, what is the government doing to help business, what about communities where the property values are stabilized and will probably continue to be at the same level and lightly float down till 2012 when whatever is suppose to happen will happen.
When I see regions like Cleveland Ohio set up to have great property values recovered by 2012 I ask myself (and you should too) – “How?” The article didn’t state what the region is doing to attract commerce. As investors in Detroit are finding out, yes, you can get great deals but you are going to be sitting on them for a long time because there isn’t any business around to support payrolls that will in turn support people to live in your house, send kids to school, shop in nice, safe supermarkets etc.
I also was in South Carolina and even though I saw some development down there things were also slow. People were moving in from up North and they were looking for work like everybody else was who was living there.
I believe that areas that have government money for small, tightly populated areas will do okay and they will appreciate a bit over the next few years. I think like a lot of places, once the spending stops though if you don’t have enough local business that can support itself, it will dry up.
The one thing about the Southern California area that is interesting is that there are a lot of small to mid-size companies that don’t get written up or videoblogged that are doing okay and can weather the Depression out for awhile. The standard rule of thumb that if you have people you can have commerce is very true because you have your consumers and producers working in the same area.
It is pretty easy to look at time frames a few years out and make educated guesses on what is happening now but that is all that they are, educated guesses.
When I make my predictions on things they are the same deal. I just to couch them more with warnings and caveats because I am too much of a realist and I don’t like reading misleading information myself if I can help it.
My advice to you and to all my readers – and to all the kids reading this on their cell phones, iPods and the latest and greatest tech is to do your own due diligence as part of listening to the psychic or “educated” guesses. Most people don’t have a clue and if you look and listen with common sense you can get a better idea of what is going on not only in business but in your personal life as well.
As for what I see real estate in the future? If you have a decent business climate, you will have people flock to your area regardless of the weather. A decent climate attracts people but doesn’t insure that the real estate market is going to take off. If there is work, people will want to set down their roots and buy homes. Is it over simplification? Sure, but it is the way things work. So, barring the end of the world scenarios which I don’t think will happen in 2012, if business has been encouraged to grow, home values will go up because salaries and wages will go up and people will bid for desirable land and digs. Shockingly boring, isn’t it?
Be healthy, wealthy and wise, gang!
August 20 2009
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Kim Isaac Greenblatt
Most Future Predictors Are Wrong
Tags: Business