Our friend Benjamin Tal was quoted in an article I ran across this week in the Globe and Mail. There were some interesting quotes in the article called The days of wine and roses and showpiece kitchens are well and truly over, for now. (Ed Note: Is it just me, or should the title of an article reflect the actual content of the article?)
Wealth effects of real estate plainly ramp up to their long-run effects much faster than the wealth effects resulting from gains in corporate equities.
Households feel more confident of gains in housing wealth and thus spend more readily and quickly when they occur.
Both of those come from a paper that Erik Belsky et al at Harvard’s Joint Center for Housing Studies. I agree with this, but I think that Benjamin Tal had a much earthier way of phrasing it.
You basically feel richer, and you go and spend and have a nice dinner on the house. That’s the way I see it.
The current economy has caused all sorts of wierd consumer behaviours, and a big part of that reason is the mainstream media putting an extreme headline on everything (except for title of this article).The important part of this has been Ben’s estimate that $50 billion has gone into cash and simple savings over the last year. This is simple cash in savings accounts and such. People are saving in more conservative ways, and that’s cash the banks are going to have to start lending out if they want to keep making money. REIN members like me are good investments and we’re going to be in the right place to get some great deals on borrowing money. How? Really good Real Estate education.
When you’re investing for the long term, a year or two in “negative equity” dosen’t concern you.