Housing's Down, Maket's Off, Oils Up & That Not So Bad!

Wow!

This was the headline on the front page of Wednesday 's New York Times ( 11-14-07).

"Stocks are still down 6% from their peak; and oil is near a record high. The US dollar is low and house prices will be falling fora long time to come.

Seriously.

As long as the financial system doesn't have a major meltdown none of these developments will turn out to be as bad as you think. Some of them are down right welcome."

"Long term, buy and hold investors ( stock) are actually hurt by a market that rises too quickly. When stocks get so expensive, returns over the next few decades are usually mediocre."

"Oil prices? American have finally started buying more efficient cars and trucks.

" It not even clear if falling house prices are such a bad thing. They really don't matter for families who aren't planning to move. They don't matter to families moving to a smaller house in a similar market. The house they are buying will have gotten cheaper too."

And for those who purchased their homes before the "bubble boom" they will still probably see a hefty profit if they sell now. It's all about timing.

"Families hoping to buy their first home, on the other hand, clearly benefit."

" The fall of the American dollar mean while, may be precisely what the world economy needs right now. It allows US companies to export more, while encouraging consumers to spend less on imports and save more.

"To often we think about the economy without nuance. We treat it as a local sports team that is ether winning or losing. We're always suppose to be rooting for stocks and homes to become more valuable and for oil and overseas vacations to become affordable."

"But that not quite right."

"There are real downsides to an economy full of expensive assets and inexpensive resources."

Where does this all leave us? The real estate market, I believe, is returning to normal. And in the long run I think that's great news.

Bill McInerney
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