With all the talk of improving economic indicators, it's pretty easy to get swept up in optimism. But despite improvements, the numbers still aren't that good. Last month's unemployment numbers fell to a three year low of 8.1 percent, but that's only because less people are actively seeking work (the government only counts those actively seeking in the "unemployed" figure).
I recently heard that there are actually 12.5 million Americans still out of a job and that "the U.S. has seen the longest period of high unemployment since the Great Depression." So, if you're fortunate enough to be well employed in this economy and have cash to spare... then my question becomes: Is this the right time to be buying real estate? For now, I'm just talking about my people in New York City, because of NYC's unique position as a financial capital, you have to look at it as it's own market.
Whenever, I'm evaluating the best choices for my life, I find it's helpful to start asking questions. Here are a few questions I feel you can ask yourself: Am I still trying to keep my expenses down? Am I more comfortable being in all cash instead of investing? Do I prefer having my money in the stock market? Or maybe, I want to diversify, have cash, money in the markets and own real estate. These are questions only you can answer. But, If you aren't clear on your answer here's what I would recommend based on personal experience (keep in mind, this may or may not be right for you, if anything it will bring you more clarity). I have a really good friend who is actually a self-made billionaire who once said to me "Stick to what you know."
Well I know real estate, I know very little, if nothing, on how to play the stock market (obviously a lot of people have this issue, as I've never personally met anyone who has been successful at it, for me). However people who do know and have those skills and tools do extraordinary well. My experience has been that real estate is an amazing appreciating asset which you can live in and get deductions on. And if you are educated or have a talented real estate agent who can guide you based on your life's needs, you should be able to make money, especially if you are willing to hold your investment for two or more years. And especially if it's a real estate investment in New York City. Because NYC draws investors from the four corners of the globe, there are more people buying here now than ever before, unlike almost any other time in history.
If you're going to buy, buy location. But you still need to figure out what part you want in cash, investments and/or real estate. I personally think owning NYC real estate (especially today with the prices being flat and interest rates being historically low) is the most solid investment one can make, essentially, there is nowhere to go but up. How do I know there is nowhere to go but up? Well... I don't, but prices have been flat... and flat for quite a while, and inventory remains tight.
Even factoring the new development on the horizon, the total listing inventory coming on the market is nothing near to what we had back in the 2005-2008. New development has been depressed since its peak in 2008, and though it seems developers have started to swing into action, inventory will continue to be low for at least a few years as many projects have only recently gotten underway.
But, when the market does take off here... it's going to go! So my suggestion is, if can stick to what you know or know someone who can really educate you to make the right decisions you will be in a great position. Don't just follow the packs as to what is hot, that's where people get into trouble. Be sure to put enough cash down or be in line with what you can afford on a monthly basis, don't over leverage yourself. Look at the comparables before you buy, be educated so you can feel that you made a good decision.
We would love to hear your thoughts and comments. And if you need an expert opinion, we're always available to answer any of your questions, email toni@elliman.com.