Real Estate Market vs Commodity market

April 8,2018 | By DENNIS DENEV

Just recently I had a client put in an offer of $1m for an apt priced at $1.58m. That’s a hefty 1/3 off the value of the asking price. I found this strange because the apt is priced realistically, well in line with the current real estate market, so the offer was of course unacceptable. I was curious though. What was the thinking behind his low offer? So, we talked it over. It turned out that behind his low offer was a big assumption. He assumed that the real estate market would follow stock market prices and eventually lose its value too.

Now, let’s clarify a few things. I know that we are off the 7-8 year cycle and the equity market has gotten more unpredictable. Yes, the VIX is not a single digit anymore, and volatility is back, so maybe we should be thinking that the previous low volatility in the stock market had a bit of an artificial effect. So, maybe it makes sense to look back to 2008—the last recession. The stock market lost almost 70% of its value then, but the real estate market in NYC lost only a moderate 10%-15% and then rebounded quickly.

With that in mind, as a savvy investor should you still keep your money in portfolios exposed to random ETFs, or should you maybe liquidate it, get the capital and put your money into something more tangible, and with a better track record, like bricks and mortar?

With the financial climate as it is, I would strongly suggest you reconsider your investment opportunities and planning abilities.  Follow the link below and see for yourself how sales prices have moved over the last 5 years in more than 20 condominiums in NYC. Please feel free to give me a call or email me and I’ll be happy to discuss your needs.  Click here to see Condominium price per sq ft Analysis!