It is said that the stock market has its eye looking forward rather than back. Obvious right? After all, we analyze a company’s stock by looking at projected earnings and growth potential. If you ask most idle watchers of CNBC or listeners to Bloomberg radio, you would find them talking about Apple, and gold, the price of oil and are we Japan poised for negative growth for 20 years or the Weimar Republic, set for incomprehensible inflation? While I have my opinions on these matters, which I have and will continue to share throughout this blog, I want to point something out that I just saw the paper today; something I don’t understand but can’t help find extremely hopeful and positive… If I asked you what is the highest performing mutual fund sector year to date was, what would you say? Probably precious metals right? Gold is well over $1300 an ounce (much to my wife’s personal chagrin), or maybe emerging markets (Brazil, Russia, India, China), and you would be right – almost. In fact, according to Morning Star, the highest returning mutual fund sector year to date is – ready? – Real estate. That’s right! Up nearly 26% year to date and 37% over the past 12 months. I couldn’t believe it – I still am shocked. Admittedly, I don’t own any REIT’s and with all the ‘For Rent’ signs I see around town, I can’t imagine commercial real estate is improving. Yet there it is in black and white, for the whole world to see, from the most respected mutual fund analyzer – Real Estate! – The top gun for the year. So now I’m asking myself, what does this mean?
If stocks trade based on future and projected growth, and real estate is the highest performing mutual fund sector, doesn’t it stand to reason that someone out there thinks that real estate is going to go up? Real estate mutual funds are up 37% in the past year? That’s incredible! And what does that say about the future for real estate? That property values and rates have dropped so far that real property is the safest and most likely bet to appreciate as compared to all other investment opportunities for the foreseeable future? I believe so. Clearly I’m not alone in this, and I like it! I like it for my buyers, I like if for my sellers who are moving up or moving out. I don’t love it for my distressed sellers, but not everyone can win, someone has to lose I guess… All I know is this: if precious metals are rising, then real property: dirt, bricks and mortar – has got to rise too. It’s like Will Rogers once said nearly a century ago, “Buy land, because G-d ain’t making anymore”.