CNBC Guest Blog
- JPMorgan Debacle Points to Regulatory Incompetence, Corruption
- Yoshikami: Four Things You Need to Know About Gold Now
- Steinbock: The Euro Zone Endgame Begins
- Laouchez: Leadership in Financial Services — Missing in Action?
- Kuntz: Finding Opportunity in Emerging Markets
- Busch: How to Trade the Euro on an Outside Reversal
- Dunkelberg: The Real Banking Crisis - They're Too Big to Manage
- Greek Exit a Worse Mistake Than Adoption of Euro
- Tamminen: Waste Not, Want Not
- Morici: The Eclipse of American Banking
MOST SHARED
- Ackman: JCPenney Sales Have Hit 'Bottom'
- Home Prices Hit Lows, But 'We See Signs of Hope'
- Social Responsibility Builds Long-Term Success: Opinion
- Don't Buy Hon Hai Shares on Apple TV Rumors: Analyst
- Facebook Stock Falls Below $29 for First Time
- The Mass Migration of the Super-Rich
- Should Facebook Buy RIM?
- Advanced Manufacturing Could Spark Next Industrial Revolution
- PB&J, Mac & Cheese Step Out From Kids-Fare Shadow
- Greece to Leave Euro Zone on June 18: Wealth Manager
- PB&J, Mac & Cheese Step Out From Kids-Fare Shadow
- Ackman: JCPenney Sales Have Hit 'Bottom'
- Goldman Investment Shines Light on Solar Power
- Facebook Options Soar on First Day
- Home Prices Hit Lows, But 'We See Signs of Hope'
- Auto Sales to Really Take Off This Summer?
- JPMorgan Debacle Points to Regulatory Incompetence, Corruption
- Are You Ready for Facebook Options?
- Option Bulls Dig Into Ivanhoe Near Lows
- Spain to Go to Market to Fund Banks, Regions
- Home Prices Hit Fresh Lows, But 'We See Signs of Hope'
- Why June Could Be a Turning Point for Markets
- Why the Global Rich Keep Relocating
- Facebook Stock Falls Below $29 for First Time
- How Valuable Are Facebook's 900 Million Users?
- JPMorgan Sells Good Assets to Offset 'London Whale'
- Citigroup on Hiring Spree for Wealth-Management Unit
- Cramer's Top Dividend Plays
RSS FEED
Yoshikami: Real Estate's Double Dip
Text Size 
Michael Yoshikami
President & Chief Investment Strategist
YCMNET Advisors
Here comes the second dip down for real estate and how intense this drop is is going to largely determine whether we fall into a double dip recession.
This last real estate downturn moved prices down to levels many expected were not possible.
Well, get used to the unprecedented because we believe that prices will continue to drop to even lower levels. One needs only to look at the latest results from Kaufman and Broad [KBH
Loading...
()
] and Pulte [PHM
Loading...
()
] to realize that housing is still incredibly soft. Even retail sales numbers from Home Depot [HD
Loading...
()
] and Lowe's [LOW
Loading...
()
] are still affected by the massive erosion in a real estate equity over the past several years.
Yes real state is still a weight around the economy's neck.
 |
Repres Foreclosed Home |
The tax credit program that attempted to slow the decline of real estate prices was temporarily effective but merely put off the inevitable as prices ultimately move to their natural state given current economic conditions.
It's a pretty simple formula; if there's more supply than buyers, prices will fall.
And if there are less buyers because unemployment remains near 10%, the dampening effect on real estate prices will be huge. No matter what bureaucrats might think, the solution is not in giving away money or keeping rates low. These actions merely postpone the inevitable. Prices will drop until they are deemed to be affordable and reasonable.
Prices for real estate could easily drop another 10% which would put further pressure on the US economy. On the positive front, this is likely the last leg down for the real estate market. On a more sober note, it will likely take many years for the market to recover its losses and, in some locations, it may take a generation.
While some look at real estate as an investment, for most homeowners it's a place to live and in all likelihood most real estate transactions now will focus on the latter. Real estate investors have simply been burned too much.
Are there opportunities to invest in real estate properties?
Yes, but these investments are not for the light of heart as there is going to be a significant amount of time before these investments pay off. It's a time horizon issue as always when you make investments and real estate is back to being an investment with a long time horizon; so much for flipping properties to make a quick buck.
Michael Yoshikami
YCMNET Advisors, Inc
Lastly, when you invest in real estate remember that it is a leveraged investment that you buy on margin. And margin investments tends to have more risk with greater up and down fluctuation. Understand that before you buy that "guaranteed can't lose property" that looks just too good to be true.
In this last downturn real estate was the key cornerstone that crumbled and impacted the entire financial system. As the economy continues to deleverage, the importance of the real estate sector will continue to be great and watching this sector will give you a clear sign as to the direction of future economic activity. Besides being just an investment opportunity for you, look at real estate as an indication of how you might invest your portfolio strategy across different allocation categories. Watch this sector closely for indications on how you should invest your entire portfolio going forward.
The roller coaster ride for real estate is not over. Learn as you watch and incorporate that knowledge as you invest your hard-earned assets.
Michael A. Yoshikami, Ph.D., CFP®, is Founder, President, and Chief Investment Strategist of YCMNET Advisors, Inc., a registered investment advisory firm (www.ycmnet.com). He oversees all investment and research activities of YCMNET. He is a respected lecturer speaking frequently on market issues, tactical asset allocation, and investment strategy. Michael and YCMNET were ranked as one of the top 100 investment advisors in the United States for 2009 and 2010 by Barrons. He appears regularly on CNBC and CNBC Asia and can be reached directly at .
Data is a real-time snapshot *Data is delayed at least 15 minutes
