Did You Know? 9-29-22

 

 

As the DOW dropped below 30,000 yesterday, almost 20% down in 2022 – yet still up about 11% from September 2019 – we could conclude that the general mood on Wall Street has shifted from irrational optimism about the economy. Now I’d say it has arrived – or is very close to arriving – into new territory: OPPORTUNISM. This new opportunity-thinking is something we should apply to our world in real estate. It’s happening already.

 

Already many real estate markets have seen buyers armed with a power they thought they may have lost forever. We are seeing buyers empowered with more choice, more time to make big decisions, and more ability to negotiate (in areas) on top of newly ‘revised’ (often from unrealistic) seller expectations. While cash has depleted in value in recent months due to excessive inflation fueled by an insane surge in demand, under-supply, war excess spending, and cheap capital, these days having cash may indeed make you king (or queen) yet again. As we see pricing on many commodities and other assets dip, having cash right now allows some to buy up things at deep discounts. Having access to capital for financing (even at higher rates) is extremely useful too. Maybe the discounts deepen, but while getting a discount of 10-15% is outstanding, sometimes even a discount of 5-10% can be invaluable when viewing the real estate markets globally, especially if that discount is applied to top-quality assets. Those expecting deep discounts from this correction and re-balancing should be aware of the BILLIONS of private equity and investor cash on standby hoping and praying for a correction. These people may not wait too long for prices to dip further in an environment where rental returns have surged.

 

All down markets end. All-up markets end too. Viewed over the long term, any market that is under-supplied with a tremendous demand for the materials and labor to create more products is almost certain to rise. You know this is a moment for belt-tightening when even GOOGLE is doing so with gusto. But new disciplines around efficiency and hard work – and some sacrifice now – are certain to equip all of us with new disciplines for the future that could be invaluable. That in itself is an opportunity not to be taken for granted. Yes, a new world of OPPORTUNITY has arrived.

 

- By Leonard Steinberg