Have you ever noticed that it seems no matter what stage our economy is in, most of the news is BAD news? I believe the old adage about “bad news sells” is true. Most people would agree that we are in the beginnings of a recession recovery. Yet, the news seems to always talk about the negative: the new jobs are not as high paying as the ones lost, most sections of the economy are looking good, but there may be a bubble looming, etc.
Our experience over more than fifty-five years in commercial real estate, coupled with the research we’ve done over the years analyzing trends in our markets indicates that most recession recoveries last 8-12 years. That is from the bottom of the recession to the top of the following recovery period.
I even found a historical chart of real estate trends dating from before we were in business, and it echoed our findings. It charts real estate cycles from 1850 to 1950, and the cycles during that period are almost identical to what we’ve seen over our years in business.
So, where am I going with this? As I mentioned, the bad news today is “prices have peaked, people can’t afford to buy anymore”, and other negative stories. The problem is the writers only look at our area, but fail to look at the world markets to see what properties are selling for in other countries. According to Global Property Guide, Monaco topped the list at $60,114 per square meter, with New York City in fourth at $17,847 per square meter.
So much for the “prices have peaked” argument. I just got the June 3rd addition of the L. A. Times Hot Property Guide. It had 100 pages of houses all over the city. What caught my eye was the number of houses priced OVER $10,000,000. I actually counted and there were 103! The most expensive was $200,000,000. Just to compare, I took a $34,900,000 house in Beverly Hills and worked out that it’s $17,925 per square meter, close to New York prices. If the same house were in Monaco, it would be 4x that, a whopping $117,041,950!
What’s the one constant here? It’s that real estate prices keep going up over the long run even if during recessions they take a hit. Notice that when some take a hit, most do just fine for their owners. You can watch on the sidelines because of the negative news or get busy and invest in real estate, which never goes out of business.