A client asked this very good question: “Is the stock market going through the same problems as the real estate market?” No, it’s not the same dynamic that we’re seeing in real estate. Real estate is in purgatory for its past sins (most of which consisted of lending money to people who couldn’t afford it). Everybody is selling property, many are underwater, and nothing will appraise for what it needs to in order to sell. Real estate won’t heal until the economy really starts to grow and that’s not going to happen with our current fiscal policy from this Congress.
The stock market is a forward-looking indicator with instant liquidity. It’s like a voting machine on what the future holds based on the information that is available right now and the sentiment of the market participants (i.e. fear and greed). The stock market is going sideways this summer as it discerns whether or not our economy is healing or not.
For long-term investors, both the real estate and stock markets are vital to their wealth. There is more blood on the saddle in real estate and I think there are incredible values in certain markets. If you have a fifteen year or longer timeframe, there are a ton of good buys out there, especially on the beaches in the South.