Perspective on Real Estate

June 19, 2002

June 26, 2002

July 9, 2002


This season of trauma and change

I've been at this over eight or nine recessions, downturns or depressions -- so little surprises me. I've seen cities fall apart when their economies deserted them. I've also seen the rise of experts on everything from rocks to rock-heads. Experts today are like psychiatrists, half of whom see the defendant as insane and the others as sane. Too many opinions are made by "experts" who are paid to defend their client's wishes and vanities.

Today, the real estate industry is universal, with big money trawling every major, and soon every minor, city for opportunities to make a buck. The locals have local banks and local bias and are handicapped by these limitations. The "globals" see each market from a different perspective -- kind of like a high-flying eagle looking for daily food. They are risk-takers, like the classic entrepreneurs are supposed to be.

As I travel and become much more involved in financing deals, I gain a higher flight perspective -- perhaps better to also gain insights that a homebody could not have. Since I began to fly so many years ago, I've had the opportunity to work in eleven countries and gather friends of sagacity and experience (old enough to usually know better).

The current national real estate market is experiencing trauma as never before when interest rates are low, and debt and equity available. The trauma is based upon the fear of the unknown, including terror, plus marketplaces responding to their own trauma and fallout. We have to be careful not to lose our nerve.

We wait, expecting the normal "recovery" and find little comfort. The stock market is blind to both reason and rationality. Capitalism is being redefined before our eyes as it seeks to comprehend the new marketplace structure: the falling dollar; the loss of trust, including some large accountants; the amateur business reporters; the loss of nerve by CEO's afraid to invest in their own plants -- thereby insuring limited recovery; indebted consumers responding only to sales and low interest; the lowest consumer savings rate; terrorism insurance; exploding account deficits requiring capital inflows of two billion dollars daily; an administration gaining maturity by experiencing the severity of the learning curve.

This is a year of growing trauma, assuring intense volatility. This year will separate those who earn our trust from those who do not deserve it.

In the San Diego region, we are a little spoiled by our weather and by sun worshipers from Canada and other planets, who fall in love with our land and the marketplace. The caution is that investors' thinking is fast-changing.

As statistics illustrate more "softness" as this year ages, you should not take any thing for granted. Real estate reflects reality as well as land. While "the crowd can become maddened" from time to time, it is still supply vs. demand. However, psychology must be a part of your evaluation. Everyone expects "one more event" of terror and you must begin to comprehend what that might mean to your investment and property.


Goodkin is an international real estate adviser and strategist, and has been a housing analyst since 1956. He can be reached at sandy.goodkin@sddt.com.


June 19, 2002

June 26, 2002

July 9, 2002