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Smart Investing Amidst Real Estate Mania

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(If you go to Yahoo USA you will find a huge number of bearish property articles--unlike Yahoo UK). Here is a good one (edited) with some interesting Buffett analysis:


Warren Buffett said: "For some reason, people take their cues from price action rather than from values. What doesn't work is when you start doing things that you don't understand or because they worked last week for someone else."
I estimate that 90% of all investors invest for price movement, not value. If prices begin to escalate, as they did in real estate from 2000 to 2004, amateurs turn pro and begin buying real estate to flip -- for example, buying a home for $200,000 and then selling it for $250,000 a few months later.
Most stock market investors do the same thing. In investor language, flipping is known as "the greater fool theory of investing" -- you're buying something not to own, but in the hope of selling it to someone who's a greater fool than you.
We all know a real estate crash coming. The problem is we don't know when.
One of the more popular predictions floating around is that investors are now moving out of real estate and back into the stock market. Another prediction, which I think is valid, is that the real estate market is set to crash because of the high costs of building materials.
But such rumors only affect those investors who, as
Buffett says, "take their cues from price action rather than from values."
During such periods of high prices and volatility, it's even more important to pay attention to value, more than price.
Yet, it's one of the toughest things to do -- stop and focus on value -- especially when prices are volatile in either direction. It's difficult to resist the urge to sell when prices are dropping and buy when they're rising
My point is that this current period is a tough time to buy or sell. Real estate is high, interest rates are still relatively low, the stock market is rising, the U.S. dollar is low, gold is high, oil and gas are high, and there's a lot of money looking for a home.
So the lesson is: Now, more than ever, it's important to focus on value, not price. When prices are low, finding value is easy. When prices are high, value is a lot harder to find -- which means you need to be smarter, more cautious, and resist your knee-jerk reactions.
A final word from
Warren Buffett: "It's only when the tide goes out that you learn who's been swimming naked."
In my opinion, there are many naked swimmers, especially in the real estate market.

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  • 333 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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