My brother Sean is featured in a Boston Globe article about home ownership among young people. Bedecked in a Cookie Monster t-shirt, Sean occupies a large, above-the-fold picture in the Real Estate section of the Boston Sunday Globe. Titled "Dude, Where's My Rent?," the piece notes that my youngest brother doesn't have a car or cellphone, yet owns two South Boston condominiums. From reading the article, it's clear that Sean isn't the only one born in the 1980s who is in this situation.
Is real estate the new dot-com? In the late 1990s, investment in expensive dot-coms without price-to-earnings ratios was the thing--until the bubble burst. Today, real estate is trendy. Property values in some locales have tripled in less than a decade. Is the real estate bubble about to burst? Or, since property, as opposed to a paper stock certificate, will always have value, does this negate the possibility of a real estate implosion?
I think the bubble will at least spring a leak. One thing that has kept the real estate market going is the cheap cost of borrowing for a home. Those wishing to "keep up with the Joneses" have found credit fairly cheap and available. With the latest decisions and announcements from the Federal Reserve, that is going to change.
Real estate is by nature cyclical. I have seen this happen before, when I was an accountant for a real estate developer in 1990.
However, like you say, Dan, real estate has an intrinsic value. While an investment may not pay off in the next year or so, over the long term it pays off very well. The tax code is written for the "little guy" and his real estate-deferring capital gains, etc.
While the market may slump for a while, I believe real estate is always a sound investment. Of course, what do I know, eh?
Be well,
Sponge Daddy
I would tend to agree with the assessment of Sponge Daddy. Real Estate has a real value to it. Most of the dot com stocks had no real value and were not even worth the paper the stock certificates were printed on. I think the key to real estate is to look at it as a long term investment and not to invest money in it that you may need right away or think you may need right away. Real Estate may no always be able to be sold quickly for a good price.
Tremendous article on Nubs. He is a mover, shaker and calculated risk taker. Real Estate is gold in Boston. His empire has only just begun.
I only wish he was wearing his Kansas City Chiefs jacket for the photo. Nice work Sean. All the best.
Feck
Real estate prices are due for a fall almost everywhere in the U.S., but most especially on the coasts where speculation has been most rampant. When and how far prices will fall is anyone's guess. It's a matter of supply and demand.
Demand has been especially high over the past few years, especially speculative demand. However, new construction is finally coming on line in a big way, spurred by the prospect of high profits and low interest rates. Even now in "hot" markets sellers are overtaking buyers and property is taking longer to turnover.
Contrary to popular opinion, real estate has no "intrinsic value." Perhaps buyers will always value real estate, but to what extent? Like any other commodity, real estate prices are bid up by speculation. Doubters need only research the great real estate bust in Japan during the 1990's. Ultimately, property is only worth what someone else is willing to pay for it.
When the real estate market is hot, highly leveraged buyers can make millions flipping properties in a month or two. When interest rates rise to a critical level and supply catches up with demand, highly leveraged buyers and short term speculators will be caught between a rock and a hard place.
Yes, real estate held for the long term remains a solid investment, only because real estate in general depreciates slowly relative to general price inflation. However, in the short term speculation can drive up real estate prices just as it can drive up stock prices.
dan, first off, happy easter! I was on my way by train down to New York City AGAIN yesterday and was reading the paper when Mel asked me if you had a brother Sean, I said yes and she showed me the picture of the great shirt Sean had on. Funny stuff! Good article too!! My favorite quote had to be, " risky as hell, what I'm doing" how dare he use the word hell on an Easter Sunday issue of the Globe!! Well anyway the Crowes were better yesterday than they were on Tue. and I'm just glad to be done travelin through Penn Station!! Waayyy tooo many freaks for me in that place!!
Penn Station really is whacked out. I don't get it, since Grand Central is not nearly as bad. It must have to do with all the people who commute from Jersey.
All this talk of the Cookie Monster t-shirt and that Globe article doesn't show the picture. I want to see the shirt!
Brian: You can see the picture next to "Real Estate" when you scroll down on the Globe's main site: http://www.boston.com/news/globe/
They don't appear to have a direct link to the picture.
Thanks Dan, that is a great shirt.
Hey Sean, don't be going and dressing up for the Globe or nuthin'. :-)
Your fifteen minutes of fame notwithstanding.
Dan:
Nice article on your brother. He certainly has inherited a great work ethic. I thought he was older than 21. I always remember your mother telling me that he was born during that big April 6th snowstorm of 1982. I wish him the best
because it is very difficult to live around the Boston area because of the cost of living.
Alas, Sean is 22. My mother is right and the Boston Globe is wrong. Even (especially?) journalists get the facts wrong on occassion.
There may be a real estate bubble on America's coasts, but here in Chicago, real estate has grown at an average pace, without a lot of good money chasing badly priced properties. Just compare prices on my site, which offers free MLS searching ( http://www.buyinchicago.com ) with prices on the west and east coasts and you can see that there is no genuine national bubble per se.
