Real Estate & the "NEW normal"
Dear Ladies & Gentlemen,
The Canadian Real Estate Association released a report August 16, 2010 that drew interpretative comments from news outlets Globe&Mail & BNN plus the Royal Bank and TD Economics on the state and future of the Canadian Realty market.
I wish to make observations on the stock-market style of behaviour and price-trend analysis being applied to 'my' industry and begin by stating that, this time, the phrase "the new normal" means little more than, nobody can use the data and prediction methods of the past with any reliability about the future (has an idea as radical as "quantitative easing" ever before been so unquestionably accepted .... by everyone?)
Real Estate is NOT the stock market. We do not experience 'corrections' or other "technical analysis" terms, we DO have 'on the bandwagon' rallies when 1) prices (or prices and interest rates) relative to incomes are low, 2) interest rates relative to history are low, 3) consumers feel confident and 4) tangible assets (that also provide shelter and/or income) are in short supply and we experience the opposite - 'off the bandwagon' dips when one or all of those characteristics are absent and of course the 2 in-between markets, that we used-to call "normal".
Real Estate is NOT the stock market. We do not think in terms of 2 quarters of positive results and optimistic "guidance" for the next 6-12 months (and fancy accounting to make up for miscalculations). Real Estate is 2 decades - over 20 years the debt principal has been nearly paid off by the owner or tenant(s) and the market value of the property greatly enhanced - and the real value in addition to the nominal value of the 'leveraged investment' aspect of the property can be appreciated.
Real Estate is NOT the stock market. We don't measure performance and trends by the second, we don't have in & out arbitrage traders fiddling with 8ths of a dollar on huge volumes, nor stock promoters 'distributing' their own stock after goosing up the price, nor web/TV/radio opinion-movers touting stocks and shorts for the day.
Overwhelmingly we have ordinary people buying a home to satisfy a family need for stable shelter, their own choice of community and a long-term investment.
Real Estate is defined as Location, Demographics and Time. Blue collar and industrial locations can gentrify (all the time in Toronto), many factors can cause an area's demographics to change (most every time to the upside $$ in Toronto) and "in Time" every purchase is a "Great Buy".
Real Estate doesn't need insider knowledge - everyone knows what they like and the bank tells us what we can afford. In contrast, 20 years ago would you have bought IBM or Google in that shark-infested, zero-sum casino called the stock market?
Next time one of the "expert economists" from the Stock/Bond Houses wants to comment on Canadian or Toronto real estate ask them to compare the stock market of 20 years ago to Real Estate and then ask them for a prediction of which stock or sector will be a better investment for the "average Canuck" (while providing that family shelter) in the 5-10-20 years AFTER the upcoming dip?
Truly
rce
Tuesday 10:56am from yesterday and today's Breakfast with Dave Rosenberg
"My early Monday morning read yesterday almost served as an epiphany of sorts, not because I have seen the light and about to change my views, but rather, that they were solidified.
The USA Today’s interview with Pimco’s Mohamed El-Erian who said: "Most people start off the day positioned for the Old Normal, not the New Normal … in the New Normal, you are more worried about the return of your capital, not the return in your capital. Simply put, investors should own less equities and more bonds.
snip"
The Canadian Real Estate Association released a report August 16, 2010 that drew interpretative comments from news outlets Globe&Mail & BNN plus the Royal Bank and TD Economics on the state and future of the Canadian Realty market.
I wish to make observations on the stock-market style of behaviour and price-trend analysis being applied to 'my' industry and begin by stating that, this time, the phrase "the new normal" means little more than, nobody can use the data and prediction methods of the past with any reliability about the future (has an idea as radical as "quantitative easing" ever before been so unquestionably accepted .... by everyone?)
Real Estate is NOT the stock market. We do not experience 'corrections' or other "technical analysis" terms, we DO have 'on the bandwagon' rallies when 1) prices (or prices and interest rates) relative to incomes are low, 2) interest rates relative to history are low, 3) consumers feel confident and 4) tangible assets (that also provide shelter and/or income) are in short supply and we experience the opposite - 'off the bandwagon' dips when one or all of those characteristics are absent and of course the 2 in-between markets, that we used-to call "normal".
Real Estate is NOT the stock market. We do not think in terms of 2 quarters of positive results and optimistic "guidance" for the next 6-12 months (and fancy accounting to make up for miscalculations). Real Estate is 2 decades - over 20 years the debt principal has been nearly paid off by the owner or tenant(s) and the market value of the property greatly enhanced - and the real value in addition to the nominal value of the 'leveraged investment' aspect of the property can be appreciated.
Real Estate is NOT the stock market. We don't measure performance and trends by the second, we don't have in & out arbitrage traders fiddling with 8ths of a dollar on huge volumes, nor stock promoters 'distributing' their own stock after goosing up the price, nor web/TV/radio opinion-movers touting stocks and shorts for the day.
Overwhelmingly we have ordinary people buying a home to satisfy a family need for stable shelter, their own choice of community and a long-term investment.
Real Estate is defined as Location, Demographics and Time. Blue collar and industrial locations can gentrify (all the time in Toronto), many factors can cause an area's demographics to change (most every time to the upside $$ in Toronto) and "in Time" every purchase is a "Great Buy".
Real Estate doesn't need insider knowledge - everyone knows what they like and the bank tells us what we can afford. In contrast, 20 years ago would you have bought IBM or Google in that shark-infested, zero-sum casino called the stock market?
Next time one of the "expert economists" from the Stock/Bond Houses wants to comment on Canadian or Toronto real estate ask them to compare the stock market of 20 years ago to Real Estate and then ask them for a prediction of which stock or sector will be a better investment for the "average Canuck" (while providing that family shelter) in the 5-10-20 years AFTER the upcoming dip?
Truly
rce
Tuesday 10:56am from yesterday and today's Breakfast with Dave Rosenberg
"My early Monday morning read yesterday almost served as an epiphany of sorts, not because I have seen the light and about to change my views, but rather, that they were solidified.
The USA Today’s interview with Pimco’s Mohamed El-Erian who said: "Most people start off the day positioned for the Old Normal, not the New Normal … in the New Normal, you are more worried about the return of your capital, not the return in your capital. Simply put, investors should own less equities and more bonds.
snip"
posted by Walk a Kb or Two in my cassins | 10:52 am
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