The "R" Word

Fredericksburg Texas real estate is being increasingly buffeted by the same winds doom and gloom that are affecting other markets throughout the country (see previous post on 2007 year-end sales).  The folks at Goldman Sachs are now openly predicting a mild to moderate recession (the “R” word) for the 2^nd and 3^rd quarters of this year.  While widely whispered on “the street” for months, Goldman’s outing of the “R” word sent the financial markets into a brief tailspin and has set the media talking heads loose to further talk down consumer confidence.

Though Goldman (and their brethren) are the same geniuses that brought us the current sub-prime lending mess that is, in large part, a reason for the looming recession, I have to agree with their reasoning and outlook (oil supply/demand, weakening dollar, etc.).  While these clowns make money whether the economy goes up or down (and, in fact, are increasingly important “movers” of the economy), you and I are left to figure out how best to weather the storm.

The two traditional stores of value in challenging economic times are gold and real estate.  Gold has the advantage of being easy to buy, easy to sell and presents substantially lower “buy in” costs.  Gold; however, is at records prices and likely to head further still so the dilemma is that you’re buying high, betting the economy will continue to struggle and hoping to time your selling before things recover (as they always do) and prices correct.  Real estate (on the other hand) is well into a “buyers market”.  As the cycle plays out, you’re able to buy on the downside, hold through the cycle and sell on the inevitable uptick (and enjoy tax advantages on certain asset classes in the meantime).  Remember Experience Matters