It’s All About Perspective

Life generally, is about perspective. The older – or should we say more mature – one gets, the more one realizes that virtually everything in life depends upon one’s perspective. Republican or Democrat? Wealthy or poor? Urban or rural? North or South? Mustard or mayonnaise? Reasonable, well intentioned people can disagree vehemently on a vast array of topics. What interests us even more is that even in instances where there’s a black and white right or wrong answer – mustard clearly trumping mayonnaise, for instance – people’s experiences – things like rearing, education and culture can still lead reasonable people to disagree, with integrity. That’s part of what makes life interesting, right?

That being clearly in mind, we offer you thing following:

In October of 2008, this home was listed for $3,795,000

This property – by any standards an exceptional home – was recently re-listed at $1,495,000. For you mathematicians out there, that’s a reduction of 60.61% in less than two years.

Here are the two perspectives:

Option “A”: The market is flooded with tremendous value. For the astute investor, the time has never been better to take advantage of record low prices and a Fed that’s promulgating a monetary policy of cheap money. From your perspective the deflation in home prices is cyclical analogous to the S&L Crisis of the late 1980s and subsequent crash in real estate prices. From your perspective, this deflationary period represents a natural market correction. If you’ve got liquidity, common sense, and the notion to dig a little bit, there are some seriously sweet deals to be had. It’s your heyday. You can buy Boardwalk and Park Place too! Pass go, get $200.

Option “B”: Disaster! Homes  prices continue their deflationary trend. Properties appraising in the millions two years ago are listing for pennies on the dollar. To make matters worse, the Fed’s resistance to raise interest rates gives lenders little or no incentive to lend. Furthermore, the recently expired home buyer’s tax credit, although a valiant effort, did little to move the market for high end homes, arguably the segment of the market in most desperate straits given the magnitude of the implosion of Alt A mortgages and Alt A derivatives. The bottom line? These are dark days. Sellers hoping to avoid tremendous losses aren’t listing. Lenders aren’t lending. The market is in gridlock.

Robert Frost said it all: These are the best of times, these are the worst of times.

What’s your perspective? We’d love to hear from you. Please feel free to comment below!

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