Real Estate Troubles Far From Over

It could take the stock market quite a while to recover from the current correction. In the investment business, even a quarter seems like an excruciatingly long period of time.

Of course, it’s likely that the housing market will take even longer to get itself back together. The big interest-rate cuts and fiscal stimulus are going to help, but, at the end of the day, they won’t be enough to turn prices around. Only the marketplace can do it and nobody really knows yet when we will get another housing boom.

If history is any teacher, in the real estate market, cycles can often be quite long.

I have a cousin who lives in Arizona. He and is wife have good jobs working for IBM. They live in a community of recently built homes and they tell me that the housing market there is really quite bad. Not only are homes not selling in their neighborhood, but they’re not selling even after prices are reduced. Fortunately for them, they don’t plan to move anytime soon. My cousin would like to move back to Pennsylvania someday, but he says there’s just no way he would put his house on the market this year.

If the stock market began its correction as the subprime mortgage market came apart, I’m wondering if a similar correlation might be necessary to get a new bull market. If this is the case, I think the broader stock market will be in the doldrums for quite some time.

I guess this is why I’m so attracted to Chinese stocks. In my mind, you’ve got to go where the growth is if you’re going to make money on the long side of the market.

Of course, China stocks can be highly volatile and the Chinese equity market is still very much subject to “management” by the government. Most Chinese stocks, which did great in the first three quarters of 2007, have pulled back significantly from their highs.

I guess if you have the money, now is a good time to be looking at buying real estate in Arizona, and investing in equities. One thing’s for certain, it’s hard to pull the trigger when the prevailing news isn’t very rosy.