Market Corrections A Good Thing?

Market ‘corrections’ such as we witness today in real estate are a good thing. Few are truly historic in their impact on the public and many are overblown by pundits seeking media attention. The present situation is a case in point.

A decade ago it was the so called “dot.com” bubble that burst. Everybody it seemed wanted in on that speculative boom. Speculators took a hit. Pension fund managers lost their jobs. But for the average citizen, life went on.

Today, in some of yesterday’s hot real estate markets, in southern California, Arizona, Florida, and scattered communities elsewhere, property values are reported to have dropped by a third. Real or imagined equity has vanished.

No question this is hard on those who bought at the top of a rising market. But a collapse? Hardly. In these markets, the decline rolls back market value perhaps 3 years. A hardship for some, but hardly a disaster. And their neighbors who bought earlier aren’t complaining, although they surely miss the unexpected appreciation for now apparently lost.

In the upper midwest, notably in cities such as Chicago and Milwaukee, there’s been little or no such loss of value. These markets never experienced the soaring bubble-driven run up in values. Sadly, even our local media prefers the more headline grabbing story of a nationwide crisis and seek out local examples to add pathos to the story.

The plus side to all of this may be the demise of sub prime and “no doc.” lending as we knew it. Brokers doing “structured” deals have headed for cover and fraudulent cash-back-at-closing, no money down deals may be too risky to attempt (it is bank fraud, after all).

Who’s left in the game? Honest investors and real estate professionals who recognize legitimate opportunities in every market, correcting or not. Today, that’s where the smart money is heading. For savvy investors this is a Perfect Storm of Opportunity. #