The Market: Needless to say, the residential real estate market has gotten a tremendous amount of press lately. After a decade of rising prices, the media began to ask (over and over and over) whether price increases could continue, and eventually created anxiety in the minds of buyers. As a result, a self-fulfilling prophecy: sales got sluggish and prices started to fall. A Goldman Sachs report just out predicts that median prices nationwide will fall 7% this year and another 7% next year. In Fairfield County the news is a little better although the numbers confirm that price increases are slowing down or going flat.

What to learn from this? The key for me is to keep in mind that the value of a home, unlike an investment vehicle that generates a return, is HIGHLY dependent on consumer confidence. The current drop in prices is, in my view, not caused by declining economic fundamentals (rising interest rates, high unemployment, decreases in immigration or household formation) but rather by a mini-panic created by the media. The point is that lots of things can impact consumer psyche: spiking oil prices, terrorism, a nuclear-empowered Iran.

That is why a home is so illiquid. Bad news or just a general consumer anxiety can dramatically reduce the desirability or valuation of your home. By the way, U.S. consumer confidence in August was the lowest it has been in a year.

Binders: Fortunately, many towns in Fairfield County have done away with these. But, they still prevail in Westport and Weston, and can be a real danger to a homeowner/seller. Although some agents will tell a seller that these binders are “not binding”, the fact is that several real estate companies have added language which makes the Binder contractual. This language is intended to prevent a seller from taking a higher offer or just changing his mind, after signing what he is told is a non-binding Binder. In just the last two months, I have been involved in two serious Binder disputes … both costing sellers several hundred thousand dollars in higher offers.

Real estate investing: I believe that in any type of market and any type of economy, there are opportunities for clever real estate investors. I have been a buyer of investment property in Fairfield County for 25 years, as have many of my clients. In every single one of those 25 years, I have seen good investors find profitable investments. My point is that if you are willing to spend the time and energy to educate yourself, there is always opportunity in the real estate investment world. What’s more, this is by no stretch brain surgery … much more important are creativity, diligence and perseverance. So, if you are queasy about the stock market, not ready for a municipal bond portfolio, or just plain excited about trying something new, take a hard look at real estate investing.

Confessions of a Real Estate Entrepreneur (McGraw-Hill, 2006): Writing this book was one of the hardest things I have ever done but also one of the most fulfilling. PS: If you are thinking of writing a book, be sure you have a very good reason. I am pleased to report that I have a 5-Star rating on Amazon and the following review from a national columnist: “On my scale of 1 to 10, this unique book rates an off-the-charts 12.” return to front