Sometimes you need to take a step back to see the big picture moving forward.
Sometimes the hosts just need a week off.
So for this week’s broadcast, we sent Walter into the vault to rummage up an interesting episode from The Real Estate Guys™ Radio Show Archives.
In time machine and behind the microphones for this encore performance:
- Your timeless host, Robert Helms
- His aging co-host, Russell Gray
- The ageless icon of investing and Godfather of real estate, Bob Helms
Back in 2009, many real estate investors were still taking inventory of the damage caused by the implosion of the mortgage-backed securities (MBS) markets. MBS derivatives were providing a lot of the high-octane fuel feeding the red hot real estate market of 2002-2006.
Staring at the rubble, it became clear that there is no “real estate market” the way most talking heads define markets.
Think about it. With gold, a barrell of oil, a share of Apple stock, or a U.S. Treasury, each is it’s own market. That is the price for any one of those items is exactly the same anywhere in the world at any given time. And what you would received as the buyer is EXACTLY the same, no matter where the order was placed or you took delivery.
That is NOT true with real estate. Even if you drill down to single-family homes and call that a market, it’s not precise enough to generalize about “the single family home market”. After all, there are 5 bedroom 3 bath spacious luxury homes and 2 bedroom 1 bath starter homes. And just as their is huge disparity in the product, there is a huge disparity in the price, stability, trends, etc.
Of course, that doesn’t even take into account the geographic market in which the property is located! Even if you had two houses down the landscaping, paint and nails, the one located in San Francisco will be priced far differently than the one in Detroit.
So real estate isn’t a “market”, it’s a collection of markets so small, they can literally contain only one very unique property. This is the WONDERFUL thing about real estate. It’s also why it confounds a lot of Wall Street types. Their “mass marketing” systems don’t know how to deal with the peculiarity of real estate.
But this is also why you, dear real estate investor, have such a fabulous advantage. If you’re willing to learn a local market, you will find very limited competition and all kinds of market inefficiencies that can permit you to get bargains.
So all this to say that market analysis isn’t macro, it’s micro. You may start in the clouds to understand the migration patterns of people and money. And you’ll want to watch interest rates and value of the dollar. But when it comes down to deal time, you better know your neighborhood.
It was true in 2009 when this episode was first recorded and real estate was the pariah of investment vehicles. And it’s true in 2013 when mainstream media pundits are proclaiming that real estate is back.
So tune out the noise, and tune into the conversation as Robert, Russ and the Godfather talk about conducting real estate market analysis in a changing economy.
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