It’s All in Your Interpretation

By Eric Daniels
EWI Instructor

Have you ever read that ominous headline, “Home prices fall 15.8% in the past year: Case-Shiller”? How about, “Home sales, prices plunge in August”? You have read these headlines the same as I have, but the question remains… what does this mean to me as an investor?

Everyday, we are faced with negative news about our Real Estate markets, but even more so now in the financial markets in general. Remember this headline “Dow Drops 7.3%; Largest Loss Since ’87 Crash”? While the “average” person views this with dismay, investors should view this as a prime opportunity to SEIZE THE DAY! Simply put, the difference between opportunity and despair is all in how we interpret it.

Warren Buffett and Robert Allen are telling us that it is a great time to invest, both in Wall Street and Real Estate respectively. Guess what, they are exactly right! This may seem difficult, given the current perception of America’s economy, but you have to remember how our media reports to us.

As the above headline stated, home prices were falling in certain regions of the country, up to 15. 8%. What they chose not to write was that, at the same time, certain regions of the country were exploding in the real estate market.

Here is an excerpt from a less-publicized article in the same timeframe: “The suburban-Atlanta region… is experiencing resurgence in pending sales — up 21 percent from July 2007 to July 2008. In August, pending sales have surged 43 percent over the same time as last year.”

Considering how to interpret these headlines will allow us to be successful investors. Think of it this way: Every action has a reaction. When someone loses their home to foreclosure, it reflects negatively on the economy. But, this opens the opportunity for investors to purchase properties at very low Loan-to-Value ratio, as well as creates a larger rental market and/or potential future buyers market.

Excluding foreclosures, lower property values and longer days on the market also benefits investors by allowing offers to be lower and normally puts sellers in a position to have to negotiate. The examples of potential opportunities in this market are too numerous to mention. The important take-away is to know how to read between the headlines.

I guarantee you that for every negative headline about property values declining, foreclosures rising or difficulties in obtaining financing, there is a positive headline for investors to read. It is merely a matter of looking for them.

Another facet to bear in mind is to “only worry about your own situation.” What I mean by that is, if you are investing in Illinois, does it have a direct effect on your business if property values in California are dropping? It does not. While you should never discount the overall health of our country’s financial and real estate markets, our main concern should be that of our personal investment areas. Read the headlines in your local papers; base your investment decisions off of those and adjust accordingly. If you base your decisions off of those headlines in the national media, you are definitely missing investment opportunities.

Here is another way to deduce what these headlines mean. Let us review the first headline in this article “Home prices fall 15.8% in the past year: Case-Shiller”. 15.8% is an average; it does not mean that every home price fell by 15.8%. The West coast could see falling home prices of 40% and the Midwest could be rising at 10% but that still leaves an average home price drop of about 15.8%. Remember, the headlines are not always as they seem.

Control your economic situation and write your own headlines! Don’t let others do it for you. The tools that you currently have, EWI and your education, your mentors and your own entrepreneurial intellect, are all the skills necessary to be a successful and enlightened Entrepreneur, no matter what direction the market goes or what the headlines read.