Submitted by: Barbra I. Miller
Some people feel that real estate investment is a lot like playing the stock market. Real estate is slow moving while stocks can change in minutes. A stock can go to zero while real estate will always be real estate. But both require expert advice. One of the main factors determining your success is the relationship between supply and oversupply. The differences are important, too. And when it comes to supply and oversupply, real estate and stocks behave similarly in some instances and differently in others. For example, real estate can often be much more manageable. You can fairly easily do your own rather thorough research into whether the local housing market is undersupplied, oversupplied, or at an equilibrium. With stocks, there are all kinds of corporate minutiae which must be carefully analyzed, involving technical terms and complex legal rules and financial instruments. Some people feel that there is simply less risk involved with real estate investment than when investing in the stock of a company.
As an example, consider housing starts and other new construction in Washington, which seem as moribund as anywhere else in the United States these days. Though the housing bubble has not affected Washington disproportionately as compared with places like Florida and Nevada, still-tight credit lines and a murky economic forecast combine to foster an atmosphere of caution and even timidity among real estate investors and builders. Also, residential realty in particular seems fairly balanced between supply and demand at the moment, further discouraging new construction and any more development for the time being. Commercial real estate is also stagnant, but has not generally experienced the turmoil in the residential sector, which, again, is far below levels witnessed in other states.
On the other hand, the real estate bubble in Nevada affected not only houses but condominiums, too. Just as houses were bought simply as commodities to be “flipped,” or sold at a substantial profit, so too were condominiums treated. Due to the September 11, 2001 tragedy, not only were enormous amounts of investment dollars poured into real estate as a much more viable alternative to the stock market, which remained in the doldrums for several months, day-traders themselves started moonlighting as landlords, purchasing property with an eye towards selling them to fellow speculators down the pipeline. Like any bubble or Ponzi Scheme, however, there eventually came a time when no more “takers” could be found and the system collapsed of its own inherently unsustainable weight.
But despite the title of this article, let’s forget trends and focus on fundamentals: Why Washington? Why Nevada? Living in these fine states is one thing, but investing is quite another. While both places have their strengths, neither one ranks among the premier markets in the United States, though Washington at least faces the Pacific Coast. So any business decisions made must take into account the fact of their geographical location in forecasting trends.
Washington and Nevada have a lot going for them, and should generally present the investor of modest means some fair action and profit. It’s really a matter of perspective (not having unrealistic expectations) and staying-power (not being impatient or greedy).
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