News & Research Archive

Pulse Of The Market (Pulse 94 - Investment? What a Quaint Idea!)

Sep 09, 2011

 

Every morning I glance at CNBC while having my coffee and reading the New York Times. I have never heard the word investment spoken on the show, at least not that I recall. It is always about this trade, that trade, the trade of the day, etc.

The lack of an investment reference is indeed intentional on CNBC’s part. The more they can keep people glued to the show in anticipation of the next hot trade, the better their bottom line. Investments, on the other hand, need time to mature and relatively speaking are boring.

Meanwhile the stock market has become even more of a gambling casino. Maybe 50 years ago, it wasn’t. You know, of course, that something like 70% of all trades on the NYSE are generated by “computer generated speed trading programs.” That makes it a bit tough for you and me to compete.

Unlike most other segments of the American and global economy that have become institutionalized and are the playground of major entities with big bank rolls, the residential real estate market is very much local. It is where one buyer competes against one seller and the operative term is investment. I find that a bit quaint but gratifying

A Rentership Society?

A recent Morgan Stanley research report maintains that falling home prices, limited mortgage credit, better rental options etc. are “fundamentally changing the way Americans live.“ It’s worth a read. The report’s authors make a strong case that the housing bubble that saw the U.S. homeownership rate increase from 66% to 69% is in reverse and moving from 69% to perhaps 60% or at a rate triple the previous percentage advance!

Cuba

The New York Times reported in August that the Cuban government might legalize the right for private individuals to buy and sell residential real estate. As the article notes, private property is the nucleus of capitalism, so such a major move would fly in the face of the socialist government that has long held sway in Cuba. The idea that Cubans can own their own home is a pretty exciting idea for Cubans.

From Russia with Love

A number of Russians have made a lot of money lately. What have many of them done with some of their wealth? Invested in U.S. residential properties, according to Bloomberg.com: in Miami Beach, Manhattan, Aspen and the Bay Area. In addition to wealthy Russians, the wealthy from China, India and Brazil are also investing in U.S. real estate.

St. Joseph Home Sales Kit

A couple of weeks ago I had a drink with a client who recently listed her home with another broker (I was originally chagrined). She commented that the broker had not done a very good job (my outlook brightened), and then she mentioned that she had been back in New York’s Little Italy, where they were selling St. Joseph Home Sales Kits. I was not aware of this, and here I thought that I knew the pulse of the market. Well folks, if you are having trouble selling your home, there is help available from a higher power and just a click away on the Internet. They come in varies sizes and prices, and of course, there are instructions as to the right way to bury a St. Joseph statue in your backyard. However, if you live in a high-rise condominium, you may be a bit out of luck unless you have a sympathetic HOA willing to let you jack hammer the perimeter concrete.

Making Some Sense of the Market

It’s a chaotic market, and I would posit the thought that none of what is happening makes sense, unless of course, you want to take a long term view and consider residential real estate as an investment rather than a trade. There are many folks in Cuba who would like to own their own home: many folks in the U.S. who own their home and can’t get out of it, at least at a price that would make them whole. They now prefer to rent, having over-leveraged and been badly burned. Morgan Stanley research is probably correct in its forecast that the rental segment of American housing will be a larger piece of the pie in coming years. Meanwhile, owning property in the politically stable U.S. (did I actually say that?)  is very appealing to citizens of countries where the rule of law is somewhat suspect, nonexistent, and/or subject to change with the weather.

If all else fails, look to a higher power. However, if you want good old-fashioned residential expertise, give me a ring.

Written by: Malcolm E.A. Kaufman

E-mail: mkaufman@pulsefactors.com


Starboard TCN is posting this article on its website and blog with Malcolm E.A. Kaufman's approval.

Malcolm E.A. Kaufman is Founder of PulseFactors™ LLC. He refers you to his website, pulsefactors.com, where you can see recent issues of Pulse of the Market© and learn more about him. He invites your comments, suggestions, and questions.

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