Regaining Perspective
· In July of 2007, London’s The Register ran following headline: “Dubai Claims World’s Tallest Building Title”.
From 1873 until today, there has never been a property peak without the cost of copper exploding.
· The price of copper cathode peaked in April of 2008 at $3.94/lb.
An inverted yield curve has always pre-dated the decline of property values from their peak.
· The yield curve (the relationship between interest rate with different maturities) was inverted during much of 2006 (meaning short-term interest rates were higher than long-term rates).
According to the Moodys/REAL Commercial Property Price Index, commercial property prices, on the whole, have fallen 41% from their peak in October 2007 – and now are equivalent to where they stood in 2002.
Despite all this grim news, owners’ asking prices remain high – as they are unwilling (or unable) to settle for less than their initial investment. On the whole, banks also are reluctant to take haircuts. And many brokers continue to communicate asking prices/rents that have long since become outdated.
For those who took heed of history’s lessons and headed to the sidelines early, there will be abundant buying opportunities in the near term. ”If you can wait and not be tired by waiting” – a line from Rudyard Kipling’s poem “If” comes to mind.