How Will Stock Market Plunge Affect Local Real Estate Market?

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Dear Sue

How do you think the falling stock market is going to affect our local real estate market?

Worried Will

Dear Will

Historically, when people pull their money out of the stock market, they buy real estate. I believe that it will continue to be the case.

Cash flow from rental properties has been a reliable source of income because it is based on people’s basic need for shelter. While the value of the asset (the building) may fluctuate the cash flow generally remains steady. Because the rents are tied to inflation, the cash flow keeps up with the current cost of living. This can be a huge advantage when planning for retirement.

Real estate investments also have tremendous tax advantages such as depreciation, interest expense and other “write-offs.” These expenses add to ones return on the investment.

Today prices and interest rates are low! The lower the cost of the investment the higher the potential for return on the investment.

One of my recent clients observed that unlike the vaporous quality of stocks one can always stand on the ground of real estate.

When America settles down and Wall Street has a chance to “right-size” and stabilize itself, we will be back in business. This credit crisis didn’t happen over night and there is no quick fix.

The federal rescue plan hasn’t had time to work. The latest stock market plunge is a direct result of impatience. We are a nation of instant gratification. Americans want everything fast, from cars to food to Internet access to profits. As my mother always says, “Get your hands off the pot, you have to let it cook!”

We are experiencing the breakdown before the breakthrough. Many investors will soon put their money back in the stock market. My money is in real estate because it is a matter of good home dollars and sense.