Real estate prices in Sequim and Port Angeles and throughout the Seattle area are holding up well compared to other investments, particularly the stock market right now.   USA Today published an article on October 8, 2008 entitled, “$2 Trillion Wiped Out of Retirement Funds.”   While this represents a 20% decline in retirement funds in a matter of weeks, the Northwest Multiple Listing Service data shows the average price of a single family home is down only 7.8% this September compared to September of 2007.

This is good news for home owners and for investors who are not over leveraged.   Again, we see that real estate is a solid investment compared to other retirement options.

In Clallam County, the third quarter of this year (July – Sept 2008) the sales of single family homes were priced as follows:

Comparing these numbers to last year’s third quarter (July – Sept 2007):

The median price this year is only down $25,500 from last year.   That’s real money, but it’s not a fortune by any means.   Days on market (DOM) are up, but not substantially for these sold homes.   [To weight the data for more accurate results, I eliminated the homes sold above $700,000, which represents a small segment of our market but can skew the data and the results.]

This should be encouraging news for those in real estate.   We are in challenging times, but we will get past this disruptive election cycle and the economy will stabilize, and we will get back to normal.

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This year has been a tough year in real estate for sellers, but the problem goes far beyond the real estate industry.   Yesterday congress failed to pass a $700 billion dollar bail out package for financial institutions, and the Dow Jones Industrial Average lost 777 points, the largest single day crash in history.   The Wilshire 5000 recorded a paper loss of $1 trillion dollars yesterday.   The Feds recently took over Fannie Mae and Freddie Mac, holders of 70% of the mortgages in the U.S.   WaMu bank files bankruptcy, the largest bankruptcy filing in history.   [Note added Oct 9, 2008:   Since the start of the year, investors have removed more than $81 billion from stock mutual funds according to the New York Times.]   And there is much more to come.

What does all this mean?   (more…)

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The uncertainties in the real estate market are part of a much bigger picture of concern for most Americans.   This has to be one of the most interesting, uncertain, and scary economic times we have lived in for a couple of decades.   Millions of Americans are looking for answers to difficult questions, such as:

1.   Is my retirement fund safe in the stock market (mutual funds)?
2.   Are my other investments in cash accounts and investment accounts safe?
3.   Should I convert more of my long term investments to real estate?
4.   What’s going to happen to the mortgage market?
5.   What will the real estate market do in the next year?   Should I buy?   Should I sell now?

My opinion, for what it’s worth, is that real estate is 100 times safer than mutual funds or stocks managed by strangers on Wall Street and largely controlled by exogenous variables over which you have no control.   Despite the craziness in the mortgage market, the government takeover of Fannie Mae and Freddie Mac, and the record foreclosures across the country, individual real estate owned by you cannot disappear, nor is it subject to the number one threat to your financial security.   What is that threat?   (more…)

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Where should your money be parked in tough economic times?   Should you be in real estate or in the stock market?   In the news today Wachovia Corp. reported a record quarterly loss of $8.9 billion, slashed dividends and announced 6,350 job cuts. The stock fell 12 percent in early New York trading in a single day.

I was talking with a client yesterday who has watched his retirement account dwindle in his mutual fund accounts over these last few quarters.   Now if your financial adviser and money management firm are good, your losses are small, but the majority of securities and money managers, in my opinion and experience, are more salesmen than professional investment managers.

Diversification is a solid investment principal, but if one had to chose between real estate and the unstable stock market, my argument is that real estate is far more secure.   Real estate prices may go up and down, but over the long run real estate has been a reliable investment, and real estate doesn’t go “poof.”

True Stories.   “Under McFadden’s management, Bradley Simon’s retirement fund dwindled from $700,000 to $267,000.” “Ron and Pam Yandell of Mansfield, Texas, turned over their $1.4 million retirement fund to a stockbroker who invested in risky tech stocks without their approval. They lost $230,000 in the tech crash.”   Read the full stories at Real Estate Still a Good Investment.

If all we had to worry about were the economic variables driving the stock market roller coaster, perhaps it wouldn’t be so bad, but there is another more insidious variable over which none of us have control–fraud.

(more…)

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Possibly Related Posts:

• Is A Double Dip Recession On The Horizon?
• Those Wall Street Tokers
• Where should I invest my money now?
• Cash is King, Stock is Not, Real Estate is a Buy
• Buy Real Estate For Your IRA Retirement Fund

If you do a search on the Internet, you will discover that the majority of articles argue that stocks have smashed real estate as a long-term investment. They will quote statistics by various companies which are totally focused on stocks. The bias is blatant. While there clearly are years in which stocks have out performed real estate, one of the major reasons I argue real estate is a better long term investment is ignored in all these comparisons on the Internet.

This may be the best single reason to invest in real estate. Some retirees have lost much of their retirement fund in a crashing stock market (April 2001), many have lost much of their retirement as the result of tech hyperbole pushed by venture capitalists and major brokerage houses, and some have lost all of their retirement fund through corporate accounting fraud. This last one is the most important reason to invest in real estate, or at least not to put all your eggs in the stock market basket. This makes real estate not just a little better as an investment but 10,000 times better. How can you compare two investments where one can just disappear through economic disaster, fraud, or other criminal acts, and the other cannot disappear because it is a piece of the earth. Real estate simply doesn’t suffer the kind of fraud and non-economic tragedies of stocks.

Possibly Related Posts:

• Is A Double Dip Recession On The Horizon?
• Those Wall Street Tokers
• Where should I invest my money now?
• Cash is King, Stock is Not, Real Estate is a Buy
• Buy Real Estate For Your IRA Retirement Fund