Do You See Your House as a Home, an Investment, or a Gambling Chip?
Sunday, June 05, 2005
I read an article in Money magazine this evening that concerns me. "Boomtown, USA" covers the insanity of the San Diego market from a purely skewed investment angle, practically offering those involved a standing ovation for their insight and brilliance. Give me a break.
The author, and most of those San Diegans interviewed, seem to be looking at homes for nothing more than a way to turn a quick buck. As a real estate agent and homeowner, I see my home as so much more. Fortunately, the rest of the articles were much more balanced. I recommend you browse the issue, or pick it up on the newstand.
I'm not saying homes aren't a good investment vehicle and that you shouldn't be thinking about your home as a giant piggy bank, but anytime people start looking at a product solely in terms of pure financial gain to be had, the outcome is rarely positive in the end. Think of all the people sitting on thousands of unwanted Beanie Babies.
By the time the general public is finally paying attention long enough to tear themselves away from American Idol and Survior, the smart investors have moved on and profited early, leaving the rest of us who are here for the long term, cleaning up their messes.
For those of you thinking about buying in now for a quick turn and burn property investment with 100% financing, I'm warning you now. Unless you plan on staying in the market long term, just like a day trader, the odds are against you winning by trying to time the market.
The only time people lose in real estate is when they are forced to sell. You may be relocated by your employer, suddenly find yourself upside down in a loan owing more than the home is worth if prices fall, or be unable to keep your payments up. When these things happen, foreclosures begin flooding the market and do nothing more than depress prices, fuel massive sell offs by scared homeowners, and bring back those same smart investors who already cleared out of the market, effectively allowing them to come back into the market to profit from it again.
Sadly, real estate often benefits from misery. Death, divorce and bankruptcy are windfalls for real estate investors. It also moves in cycles. Buy and hold is a good long term policy. Don't fall prey to buying in at the peak and selling at the bottom, painfully losing on both ends. That's not being a smart investor.
If you choose to ignore my warning, I have a feeling I might see you at the roulette tables in Vegas too. I wish you the best of luck there as well.
Just remember: They don't build those casinos for free...
The author, and most of those San Diegans interviewed, seem to be looking at homes for nothing more than a way to turn a quick buck. As a real estate agent and homeowner, I see my home as so much more. Fortunately, the rest of the articles were much more balanced. I recommend you browse the issue, or pick it up on the newstand.
I'm not saying homes aren't a good investment vehicle and that you shouldn't be thinking about your home as a giant piggy bank, but anytime people start looking at a product solely in terms of pure financial gain to be had, the outcome is rarely positive in the end. Think of all the people sitting on thousands of unwanted Beanie Babies.
By the time the general public is finally paying attention long enough to tear themselves away from American Idol and Survior, the smart investors have moved on and profited early, leaving the rest of us who are here for the long term, cleaning up their messes.
For those of you thinking about buying in now for a quick turn and burn property investment with 100% financing, I'm warning you now. Unless you plan on staying in the market long term, just like a day trader, the odds are against you winning by trying to time the market.
The only time people lose in real estate is when they are forced to sell. You may be relocated by your employer, suddenly find yourself upside down in a loan owing more than the home is worth if prices fall, or be unable to keep your payments up. When these things happen, foreclosures begin flooding the market and do nothing more than depress prices, fuel massive sell offs by scared homeowners, and bring back those same smart investors who already cleared out of the market, effectively allowing them to come back into the market to profit from it again.
Sadly, real estate often benefits from misery. Death, divorce and bankruptcy are windfalls for real estate investors. It also moves in cycles. Buy and hold is a good long term policy. Don't fall prey to buying in at the peak and selling at the bottom, painfully losing on both ends. That's not being a smart investor.
If you choose to ignore my warning, I have a feeling I might see you at the roulette tables in Vegas too. I wish you the best of luck there as well.
Just remember: They don't build those casinos for free...
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