The title to this article implies that you might be about to read something political. You are not. While we all have thoughts about what “America” is politically, no one has asked to hear my opinions about politics. Fortunately, real estate is a different matter, and the “America” addressed here is the economy and real estate market we knew before this one. Those markets existed before what I’ve referred to as the “Silly Years”. Unfortunately time has proven that label to be inadequate. We now know that those years were more than silly. They were fueled by fraud, poor appraisals, and greed on every level from Wall Street to next door. The years were far more than just silly.
The question now is what we do to get our markets back.
If you haven’t got enough to think about, ponder this: If we paid double what property was worth in 2005, (believing it would sell quickly for more, and therefore the more we bought the better), then the developers from 2005 and before have all the money. If they have all the money, why are they filing bankruptcy? Banks can’t collect their loans, and they say they have no money to loan. If corporate America had money, presumably the stock market would be doing better. So I ask the question, if the Developers, Banks, Corporations, and you and I don’t have the money we overpaid during the Silly Years, then where is it?
If we could answer that question, wouldn’t the solution be to tell the all powerful federal government to just get it back? We could pretend it was all a mistake, and ask for a re-deal because we don’t like the cards dealt over the last few years.
Is it possible that five years ago there was no greater quantity of money than there is today, that the money was just moving around? Today it is static, going nowhere. All of us in a services industry get paid when money moves. The money is not gone, it just died.
If all of the above is too heavy for polite conversation, then you see why I don’t get asked out much. But it leaves us with the question, how do we get back the reasonable, ordinary real estate and commercial markets that we knew before the bubble? On that issue I have some thoughts:
- If you hold over-financed real estate that you can’t afford to own, get rid of it. It will sink you financially, and you’re keeping the property off the market. It won’t come back enough to be worth holding. What you do about the balance you cannot pay is another subject, but for purposes of this article, if you bought real estate that you expected to sell for a profit, and now cannot get even close, get rid of it and deal with the balance later.
- Don’t be afraid to buy real estate at its real value. To find out its value talk to someone whose business is to serve your best interests, not those of someone else. Some of the richest men in America made their money buying during poor markets. In fact, we all know they didn’t get rich buying high and selling low.
- Buy investments. In so far as you are able, buy something today at a reasonable price, and plan to sell it, use it, rent it, or otherwise make it more valuable.
- Don’t consume more than your income.
- Don’t count real estate equity as income or loss. For years we borrowed against the equity we thought we had in real estate and by so doing spent money we did not have; equity only becomes income when property is sold.
The above are only a few thoughts. Those who believe that cash is king may very well be right, but it only has value when it moves. Everyone benefits when it moves intelligently.
We get America back when most people quit being scared to do business. There is a very good chance there is no “pile” of money waiting somewhere until the storm blows over. There are only many people who will choose to participate in the economy, or not, and if they choose to do that in ways that are not wasteful, we get back where we were.