As I’m sitting here reading the CoStar weekly newsletter and comtemplating my first cup of coffee, I realize I may not need it after all. Mark Heschmeyer of CoStar really tells it like it is in his report this week. There’s one quote I want to pull out of this article and comment on “Jeffrey Mezger, CEO of KB Home, the fifth-largest U.S. homebuilder, said last week he does not expect the overall U.S. home market to bottom out until the end of next year and that prices will not increase until well into 2009.” Wow. That’ll wake you up.

The fact is [tag]real estate[/tag], historically, for the average person, the non-developer, is a long-term play. Unabashed flipping and rampant [tag]condo conversion[/tag] by every guy with a hammer- like we’ve seen over the last few years - is rarely as profitable as it had been recently.

If you bought your [tag]multifamily[/tag] or [tag]income property[/tag] seven or eight years ago the value of your property has likely increased by more than 80%. In fact in the summer of 2000 the average multifamily was on the market at $223,747 -today it’s $392,288. The unsophisticated might say “well there are plenty of stocks where you would have seen that return”. Oh really? Did you leverage the value of your stock purchase by financing 80% of the purchase and then have someone else pay the vig? No, but you did with your real estate purchase.

Let’s just assume that all those years ago you were smart enough to buy so that the rents covered your monthly nut, but you really didn’t have any cash flow to speak of after repairs and maintenance etc. If you cashed out today you, even if you (OH! Perish the thought) paid a legitimate competent broker a reasonable, and customary fee to sell your property for market value. You would NET (assuming you were on a 30 year amortization schedule) $216,724.90. That’s 389% on top of your original principal. You would now have 484% more money than you started with 7 years ago. What are the chances you’d do that in the stock market? This figure doesn’t even include the depreciation and other tax benefits you took over the years.

Which takes me back to the quote I originally pulled out of Mark’s newsletter and I wanted to talk about. Yes, the market is down. It is likely going to be down for a while. We probably won’t see spring 2005 prices again for as many as 3, 4 or even 5 years. But to the savvy, prudent investor this doesn’t matter. Don’t try to time the market. Very few people do it well. Don’t long for 12 or 24 months ago. It’s gone.

If you’re thinking about selling, especially if your real estate factors into your retirement and you’ve owned your property for a while simply do the math. Yes you could wait 5 years and your property might be worth what it was in 2005; or, you could go on with your life plans and sell your property knowing that you’ve made solid financial decisions and that over the last number of years those decisions have paid off handsomely