Real Estate as an Investment Vehicle is Not Dead

Is real estate dead? It may seem that way. After all, real estate prices have tanked iin recent years, and have wiped out trillions of dollars in American value. One economist even concluded that real estate has had no inflation adjusted real return since 1980. While these studies are sobering, real estate developers and investors should not bail yet. Rather, they should take a clear eyed look at fundamentals that support real estate price appreciation.

Let us start with why the real estate price collapse is not a long term concern. To the casual observer, it appears real estate is not the safe investment everyone thought it was. That is fallacious thinking. This is the first time since the Great Depression that there has been a worldwide collapse in prices. Furthermore, that collapse was not caused by a sudden lack of demand, but by overlevehagging. Too many people used real estate as piggy banks, and speculated more purchases. The recent downward pressures indicate not that demand was weak, but demand was so artificially high that it increased supply.

The second reason to be bullish on property is because of an increase in demand. Today, 315 million people live in the United States. By 2050, that number will be 400 million. Those extra families need to live somewhere. They also need commercial real estate to find jobs in, for they will presumably be both consumers and investors.

Finally, property has turned a corner. Case Schiller Price Index has seen median housing prices actually rise in most cities. The encouraging thing about this from an investment perspective is that another bull market is forming. Perhaps there will be some price decreases going forward, but the overall trend is up.

Property is part of the American culture. Many American real estate partners, far from keeping property dead, are actually reviving it. Real estate will be there not just for you, the casual investor, but for your children as well.