Bad economic news continues to dominate newspapers and other media. Just this morning, the New York Times ran a front-page story about the arrest of two fund managers at Bear Stearns for tricking their clients into investing in subprime mortgage-backed securities. . Our dollar is at a new low against the euro and other currencies as the price of oil continues to climb. It seems to me that we must all now realize that our way of life is undergoing a radical change.
How do Americans invest, especially in real estate, when there is such uncertainty in the country? While the New York market continues to remain remarkably strong due to foreign investment due to the weaker dollar against other currencies, the rest of the country is still experiencing weakness and in some cases its value continues to decline.
The way to form an investment strategy is to first understand the emerging fundamental change in the position of the United States relative to the rest of the world. Although our economy continues to be the largest and most integrated in the world, in the future it will not be able to force others to do what it wants by sheer force of will. Right now, because of our government’s failure to have anything resembling an energy policy for 35 years, there is a colossal transfer of wealth from the United States to oil-producing countries. Historically, we have been lucky to have these countries invest their profits in America since our economic growth was more consistent and predictable. Our financial markets have also been the most stable. Neither is the case anymore, as evidenced by new investment construction in Dubai and elsewhere.
With the price of oil at historic highs, the United States can no longer afford to have an SUV in every garage and homes miles from jobs, schools and stores. Unfortunately, many Americans are slow to embrace the changes that hinder our way of life…for us, bigger has always been better in everything from cars and homes to RVs and jewelry. The American dream must evolve into a more affordable and sustainable dream. Therefore, real estate continues to offer strong investment opportunities, but I would advise you to consider energy efficiency, proximity to employment and size when determining which home will be most valued. .
The United States and its citizens must truly learn to live and work in a global economy. Even real estate, which was generally thought to be more impacted by local issues, is now increasingly linked to external factors. When putting your money into property, think broadly about national and global economic fundamentals and your personal financial situation to ensure you can manage the costs associated with property. Real estate will continue to be an important component of individual financial and investment portfolios, but buying decisions need to be assessed differently than they have been in the past. By carrying out this careful assessment, you will ensure the future health of your portfolio.