Housing starts and other new construction in Washington seem as moribund as anywhere else in the United States these days, according to industry experts who have analyzed real estate data from the past several months. Even though the housing bubble has not affected Washington disproportionately as compared with places like Florida and Nevada, still-tight credit lines and a murky economic forecast continue to combine and foster an atmosphere of caution and even timidity among real estate investors and builders.
Some people honestly believe that real estate investment is no different than playing the stock market. Professionals generally disagree. One of the main factors determining one’s level of success is the fundamental but often forgotten relationship between supply and oversupply. The differences between real estate and the stock market are almost all-important.
For when it comes to supply and oversupply, real estate and stocks behave similarly in some instances and differently in others. As an example, consider that real estate investments are typically much more understandable and thus that much more manageable. One can fairly easily do one’s own fairly thorough research into whether the local housing market is undersupplied, oversupplied, or at an equilibrium. With stocks, there are all kinds of corporate minutiae that really should be very carefully analyzed, details that involve technical terms and complex legal rules and financial instruments and who knows what else. The tempo of real estate investment is also very much slower than stocks, where values are updated every minute. So some people feel that there is simply less risk involved with real property than when dealing with paper properties.
And yet real estate crashed, and crashed bad, same as any stock could have. The real estate investment bubble in Washington has affected not only houses but condominiums, too. Just as houses were bought simply as commodities to be “flipped,” or sold at a substantial profit, so too were condominiums. It would seem that residential realty now seems rather balanced between supply and demand at the moment, which has the effect of even further discouraging new construction and any more development for the time being. Such a situation should help with the market’s recovery.
After all, it was the glut of housing that lead to the current crisis, where, like in any Ponzi Scheme, the supply of takers ran out and no one was left to buttress the pyramid. Some experts even believe that Washington’s relatively close proximity to Asia might prove an asset in any future recovery.
The most obvious beneficiary of any Asian connection would be California, however. Yet given Microsoft’s continued dominance in information technology and the company’s location just outside Seattle in Redmond, the State of Washington is a strong contender for any economic “rising tide” emanating from across the Pacific. While not unused to an Asian presence, given the state’s history of Chinese and Japanese communities, Washington does not yet have the critical mass necessary to reproduce the same levels of investment California has seen for the past three decades.