A New Age with Old World Characteristics

By January 21, 2015 Market Report No Comments

A New Age with Old World Characteristics

Yesterday we were in a meeting with one of our lending partners and were discussing overall market trends and their influence on Real Estate decisions. First, let me share just a couple of the predictions from their economists.

1. Oil will hit $40.00 per barrel before it rebounds
2. Interest rates are going to drop even further

I don’t know about you but these predictions blow my mind. Who among us would have predicted interest rates below 4% 5 years ago? I would guess not many. Now, let’s not forget that these are just predictions but these banks live and die by the accuracy of this information. My reason for reciting these predictions is that our conversation centered on the fact that 60% of transactions in our market are cash.

Why is that? Of course there are many reasons that this might be the case but the one we discussed was that for the past 4 years real estate has been an appreciating asset. Indeed real estate has increased by roughly 50% over the past 4 years while at the same time interest rates on deposits are barely north of 0%. Clearly, these numbers were inflated due to the beating we took during the recession but all signs are that real estate will continue to appreciate over the foreseeable future.

We all have different philosophies on investing and they have to adjust over time but my point here is that while real estate prices have risen and no longer reside in the basement they are stable and indeed are showing respectable gains. While we have been experiencing little or no inflation real estate is a great hedge whenever this trend reverses.

If you have been on the fence with regard to purchasing a winter residence or have given thought to real estate investing now might be the time to make your move. I know that the stock market has been strong but for me the intrinsic value of real property has far greater appeal. Give us a call at 239-963-4811 and we can further discuss these matters and how they might impact you. Here is to a prosperous new year.

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