Construction stocks have always been a good way to gage the real estate market. More new housing starts-market is going up. Fewer new [tag-tec]housing starts[/tag-tec]- market is going down. Well…maybe.
Paying attention to such companies as Toll Brothers, which is one of the largest building companies in the country, is prudent. But it’s not the only way to get into the pulse of where real estate is really headed to.
As we discussed in the previous post, Can Your Tree Cutter Predict the Real Estate Market?, if you have your ear to the ground, or in that case, up a tree, you can learn a lot. I’m reminded of a rather stupid yet successful ad campaign that ran for years on a local radio station. It was for a bill board company.
"When you’re in your car your eyes are constantly looking." Let’s hope so.
The truly successful real estate investor simply needs to observe. Period. I guess it’s like driving. Yep, you need to look outward and forward to find out where you’re going. You need to see – to see. Did you observe some drivers who weren’t doing that this morning? Were they involved in other activities like talking on their cell phones, putting on make-up… eating? Irritating, isn’t it?
I think we’ve made all of this entirely more complicated than it has to be. You don’t need a string of degrees to look around and see what’s going on. "Regular" people prove that everyday. That’s because they observe, and make reasonable, intelligent assumptions based on what is going on. Then they tailor their investments accordingly.
Let’s get back to Robert Toll of Toll Brothers. What does he think and how does it affect us? Should we listen?
"Nobody wants to buy something that they think will cost less two weeks or two months later."
Isn’t that profound? This bit of wisdom has been bestowed from one of the men who gave us pre-constructed luxury homes. Or should I term it "mansion manufacturing"?
According to him the nation’s unhappy (difficult elections) and there have been too many undisciplined speculators in the market.
Is he right? To a degree.
There’s a better explanation. Real estate moves in cycles. We have downs, ups, and boring middles.
We just came out of a rip-roaring market where homes increased in value almost overnight. People went berserk. Some over-paid, some got stuck in undesirable [tag-ice]ARMS[/tag-ice], while others are sitting in white elephants, unable to sell. It was a sleek, exciting meteor shower; fun while it lasted. But now we’re to a cold rainy Monday morning and some people are ringing their hands in disbelief. Some people are cursing real estate.
It’s not the real estate that’s the problem. It’s the misuse and downright abuse of real estate that’s the problem. Over-building, over- speculation, sprinkled with plain everyday greed. Robert Toll is right, but did he help contribute to the problem?
I’m saying all of this to point out we’re due for a cycle re-cycling. In other words, it’s time to adjust to a new and slightly different market. Is the sky going to fall? Nope. What about the bubble? What bubble?
And yes, certain areas of the country are hurting. But the primary reason for that is they’re going through more of a re-cycling than other areas. San Diego is adjusting. San Francisco is correcting itself. Phoenix is stabilizing. That’s just a normal reaction. It’s a balancing process. The planets are getting back in line.
Here’s the important take- away point. Money can be made in all real estate markets. Good markets and bad. There are investors in Davidson County actually crying right now because prices haven’t gone down enough for them to jump back in. Never mind a show of hands.