By Ozzie Jurock
This article appeared in The Vancouver Sun on November 3, 2001
The most often asked question: What will happen to the real estate market following the September 11, 2001 disaster?
As if I knew... However, after some 30 years in the business, it is clear to me that on average, we as individuals sit back and wait until things have been proven within our own mind before we will be moved to action. Thus, we must have confidence. (This is why we sat back during the last few years and jumped into the market only after the BC election - we had confidence again, we didn't before). Our natural human instinct within us leans toward doubt before we are convinced. It is this very same instinct, which offers perhaps our most formidable adversary when trying to survive our own buying and selling decisions. .. and the reason why people always buy at the top (they seem sure) and not at the bottom (they are in doubt). Said Martin Armstrong in a speech in 1997: "The vast majority of players in a leveraged position tend to win the battle in their original assessment of the situation, but they lose the war because they have bought more aggressively at the top instead of at the bottom." Thus inevitably, the lowest risk is always when it appears to be the greatest risk.
So, confidence, belief and risk. Trying to identify and predict the level of confidence that we collectively have after September's disaster ... that is the question. It is the level of confidence that prevails in the market segment (stocks, real estate ... ) - every time we make an investment decision that will determine our success.
So how confident are you?
An open mind to the future is only possible through the guides of the past. Whatever has happened before, is likely to happen again! It is the nature of the beast! So let's look at the past and see what we can learn from it:
2 years after the Korean war the stock market was up 39.3%, after the Cuban missile crisis 57%, after the Kennedy assassination 33%. 2 years after the 1987 crash we were up 54%, the Persian Gulf war 31%. In fact 2 years after the 18 worst disasters since Pearl Harbour stock markets were up an average of 37%. I do not have statistics for real estate but I can share this: In 1969 I could not give away brand new 3 Bedroom houses in Burnaby for $19,900. In 1974 (after the DOW dropped 40%) Realtors were "prowling like hungry tigers" according to an article in the Sun in 1974 when houses 'crashed to $56,000". In the fall of 1982 I spoke to 600 Business people at the Hotel Vancouver venturing a "good buying opportunity only to find myself having to defend at length the very high prices ($110,000).
The above indicates how resilient we all can be and how quickly we can shrug off bad news.
Having said this, we have to remember that crises naturally come at different points in the business cycle, and that variable adds to the difficulty of predicting future outcomes based on the past. Even before the recent tragedy, consumer sentiment had plunged and profit warnings were plentiful. However, there is comfort in the study of the past.
Major Point: The average buyer is confident. This week talking to developers, there are some fine samples: Michael Sikich (604-889-8998) of D'Ovidio Marketing reports that interest in the new 16 story 51 suite North Shore High-rise "The Symphony" is very high. "We are having our grand opening November 4th, the show suite is not finished yet and we had over 200 couples through this weekend with 6 deals firm". (Buy a 1 bedroom from $142,900, a 2 bedroom from 209,900). He also reports that the all-steel and concrete construction "Shaughnessy Square" in Port Coquitlam. A great 3-story marketplace with pub, has sold 22 deals in the last 40 days. (Buy a 4th floor loft with roof balcony for $142,900). Daryl Simpson of BosaVentures (C) 604-506-3365) reports an even more astounding success. The "Eden" has now sold 110 units since Sept. 29th. (Yes, after September 11!) Interestingly enough of the developments "13 citihomes" (multi-level apartment homes with ground level/street front entries and roof decks) only 1 is left.
At the current Canada Savings Bond rate of 1.9%, a well bought real estate investment showing an 8% plus return is not only a great return but still has a fine capital gain upside too ... once we are back in confidence.
Finally our future may depend greatly upon our willingness to stand alone alongside our convictions. Before we can prepare for something, we must be convinced of its coming. Right now it is too early to see a certain outcome. However, to assume that a given trend will stay in motion forever is perhaps the most insane of all unwarranted assumptions.
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