The Wall Street Journal recently ran a blog post that documented a generally grim outlook toward the real estate market on the part of consumers. This is not so shocking, considering how many people ended up losing money in the real estate market not too long ago. The blog and the diminished expectations, however, also show something that is possibly positive in this attitude, though it may not please a media looking for the next big financial bubble to cover.
People buying homes today tend to be doing it for the right reasons. First, they recognized that buying real estate—particularly luxury real estate—is a form of consumption. It’s not an investment and it’s not a guaranteed way to make a return on the money that you put into the home. This reflects a bit of realism on the part of buyers and, unless one is inclined to think that it’s better to go into the market as a Pollyanna, this is a good thing. Buyers understand the risks and potential rewards of owning real estate to a much more substantial degree than they did in the past.
People are also being smarter about how they buy real estate. When the dominant attitude was that buying a home was one of the best ways to invest without engaging in risk, people ended up putting themselves at great risk by purchasing homes that they could not afford. Today’s buyers are behaving more intelligently than they were during the 2000s. A home that one cannot afford is simply a home that one cannot afford, as opposed to that home being seen as justification to get an even larger mortgage.
A real estate market recovery—a real recovery—will not be a return to the bubble end of the bubble and bust cycle the nation so recently and so painfully experienced. Consumers who understand the risks involved with how they spend their money and who spend within their means create a sustainable and vibrant economy that’s built on intelligence and good sense. For those in the luxury and ultra-luxury markets, finding a great home doesn’t mean stretching money to its absolute limits. It means finding something that they have enough money to afford and finding something that represents a sensible way to spend money. In today’s market, luxury also means having the luxury of not burying yourself in debt for a home you cannot afford.