How Does the Economy Affect the Real Estate Industry?

I saw this article today, and thought I’d share it with you:

RISMEDIA, Sept. 4, 2008-I’ve been in the real estate industry for so long that I feel like I should be 90 years old. The truth of the matter is that I’m only 57, but I’ve been in the industry since before I was even of legal age to drink. That is a story in itself, not being able to have a glass of wine when you get home after a day in the real estate industry.

However, what I want to address a subject that seems very apparent to me after witnessing several up and down markets in the industry over the last 36 years. The subject is really a question-how does the economy affect the real estate industry?

I’ve noticed that when the citizens of this country start to feel insecure with our country’s direction, coupled with a fear of the economy and the stock market, they start to take the money out of the stock market and put it into real estate.

I saw this right after 9/11. If you go back and look at when the latest real estate boom first got its toehold, it was right after 9/11. Just before, the country was going through the DOT.COM bubble meltdown. Then 9/11 happened and the next thing we knew we were on a wild ride for years of escalating real estate values.

Why? Because the public became concerned with where the world and this country were headed, and because they saw firsthand how easy it was to lose a fortune in the stock market.

So here we sit again. The entire Presidential race has been transformed from the Iraq War being the primary issue to the economy being the primary issue. The public is scared to death of our financial institutions solvency and the stock market is on a wild roller coaster ride. So once again the public is faced with the same fears of 2000 and 2001.

Then you toss in the huge decline in real estate values across this nation and a 3-year pent-up demand of buyers, along with low interest rates, and we have a perfect storm developing once again to start a prolonged real estate recovery.

The pent- up demand combined with the other concerns of the economy makes people want to put their money into something tangible, and real estate is tangible. It doesn’t go away like a company can. I believe that most of our citizens believe that we are at the bottom at this point and as a result real estate becomes a much more attractive investment vehicle in these uncertain times.

In the last two weeks, I haven’t seen a single article that hasn’t had a positive spin on the real estate Industry. As I’ve advised many people over the years, never worry about the bottom bottom or the top top when buying or selling real estate. The people who try to catch the market at the very bottom or the very top almost always misjudge. Anytime you can get within 5% – 10 % of the bottom or the top, you should make a move.

I believe most everyone agrees now; it is finally time to put money back into real estate.

Don’t be surprised in the next few months when the headlines start declaring that a real estate recovery is here.

James A. Crumbaugh III is CEO of Allison James Estates & Homes.

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