Forbes on Real Estate Versus Stocks
This week’s issue of Forbes reminds people that, despite what’s happened over the last few years, real estate is not necessarily a better investment than stocks. The article points out that real estate prices are a lot “stickier” than stock prices and that they are not as prone to busts (a 5% down-year is a…
This week’s issue of Forbes reminds people that, despite what’s happened over the last few years, real estate is not necessarily a better investment than stocks. The article points out that real estate prices are a lot “stickier” than stock prices and that they are not as prone to busts (a 5% down-year is a big number for real estate)–at least on a national level. (Though it looks like Big Apple r.e. outpaced the rest of the country over the last 25 years.) Hot local markets, however, certainly can suffer bigger declines and can remain stuck for years. As the oft-quoted Laszlo Birinyi remembers, “In the lates 1980s, when I lived in New York City, you couldn’t sell a one-bedroom apartment.” How times have changed.
Real Estate vs. Stocks [Forbes]
Perhaps more to the point than the Business Week article is the Observer article referenced in my later message. Give it a read and tell me what you think. It’s my opinion that it’s right on target.
The comment citing Business Week that New York has the lowest rate of investor-owned property units at 5% seems way off to me.
In Manhattan, thousands of units are investor owned (sponsor units, condos as rentals, etc) and thousands more owned by out of towners as pied a terres. Perhaps if you include the entire city, 5% is possible, but still not likely.
People buy here because they think its a good investment and/or they want to live here. But the vote of confidence in the market and its prices is not all by owner occupants.
here’s an article that makes much more sense:
http://www.observer.com/pages/frontpage2.asp
If anyone is awaiting the increase in interest rates to bring market down – don’t hold your breathe-
Bond market past few days looks like will bring mortgate rates back to low point. And how long has Fed been trying to drive them up now?
It should also be noted: New York City has the lowest percentage of investor-owned property (somewhere around 5%) in the nation. This according to Business Week. (Online Extra: Interactive Table — How Bubbly Is Your Housing Market?- April 11, 2005.) People are actually buying here to live here. And they are buying because it makes much more sense than renting.
Yet another annoying article comparing the stock market to the real estate market. The author qualifies her data so much it nearly renders the comparison meaningless. She says herself, “pitting home sale prices against the S&P is an imperfect and less than highly sophisticated comparison, for a host of reasons.” She then proceeds to rattle off a number of the “reasons” but certainly misses a bunch. The differences between a stock investor and a home owner are innumerable. What a silly article.
Both stock returns and r.e. returns are highly affected, in the same direction, by interest rates. The big move in both over the last ten years coincides with the long-term drop in rates.