There is so much chatter everywhere recently about “bubbles bursting.” Picture that. I’m sure you can remember as a kid blowing bubbles…they’d get bigger and bigger…the joy of them growing was intoxicating. You can’t stop yourself. BIGGER! And then…POP! The bubble bursts and the addictive nature leads you to try again…yes, bubbles burst. Kid’s soap bubbles, not real estate.
Real estate is a hard asset. Hard assets can increase and decrease in value over time. We have witnessed some massive increases in the past few years fueled by inflation, under-supply, under-building, demographic shifts and adjustments, massive wealth creation, etc. Some of this was natural and expected, although a bit delayed. Some of it was artificially fueled by extremely low rates held low too long. Some of it was speculative. Some of it was fueled by increased corporate-style thinking around ownership.
But think of real estate – especially homes, an essential need – as more of a balloon than a bubble. Some cycles inflate that balloon and others deflate it. And most importantly: every home – if we think of it as a balloon – is different. Never forget that all markets and homes and areas and neighborhoods are different. Averages are bad, often useless, data. Real estate is HYPER-localized.
A little deflation after massive inflation may serve us all well, especially those that argued that once prices are up they can never go down. They are wrong too. But these words ring truer today than ever as it relates to homes: “A brick is a brick!” Other assets have the capacity to burst and leave behind mere fragments/traces: Not homes.
So, when you think about your real estate decisions, ask yourself: How are you ensuring that your next move is not just another bubble, but a lasting investment in a solid foundation?