(post by Dee) Everyone has the same question to ask? Will the prices of real estate fall even more, and if yes, in what markets, what properties, and how much? And what about other assets, like stocks and bonds? Wall Street meltdown of the past three days (Dow down 1000 points!!!) leaves everyone wandering: where do I invest my money? Real estate - nope. Stocks and bonds - hell, no! CDs? You kidding me? With bank CD rates in the mid 3% to low 4% return, you are barely covering inflation.

A friend of mine manages my IRA. He is a professional and a real investment geek, but even he who “would never want to do anything else but this” is now wandering what to do to make his clients money GROW, not DISAPPEAR. It’s not an easy feat with prices of stocks fluctuating 20-30% each day. That is insane! You never saw these types of fluctuations on any large-cap stocks, but today a 15% drop in price of a major index component stock is a norm.

Back to real estate, though. Yes, we have seen some markets melt… Florida, California, Phoenix, Vegas, Detroit. The overall theme in press is that prices need to correct even more to stabilize the market. That further reduction in home prices is inevitable. Holly Molly! Will our New York market, an island of real estate stability and strength withstand the waves of housing bubble burst, the global economy faltering and more bad news like those of Hurricane Ike straining the Federal budget even more?

The somewhat “analytical” answer to this question is that real estate, more so than any other investment option, is an income-earning asset by nature, and a real, tangible, location-centric piece of property. Unlike stocks, where you own a tiny percentage and have ZERO control, real estate, at least on a small scale, is an asset you can influence and control. For one, you can improve it through renovation. You can put good tenants and maximize the rent income, while reducing operating cost (both to an extent). Land is limited and so the value of the lot where your property sits will always be there (unless you are on an eroding shore). There is only one Manhattan and one Queens. There is some space left, but not a whole lot. Stocks can be issues, split, merged, and none of it us under your control.

So, while this article from NY Times states that “most economists think house prices must fall an additional 10 to 15 percent to get back to reality. One useful measure is the relationship between the costs of buying and renting a home. From 1985 to 2002, the average American home sold for about 14 times the annual rent for a similar home, according to Moody’s Economy.com. By early 2006, home prices ballooned to 25 times rental prices. Since then, the ratio has dipped back to about 20 — still far above the historical norm”, those who buy good property with potential to earn rent income in a good area, with decent down payment, and can afford the mortgage payment WILL BE OK. Really. Maybe they will need to wait a while (2-3 years at this point, is my opinion) to get their value back, and longer to make some serious gains, but at least their stocks won’t disappear like the Lehman Brothers stock.

Plus, if you are buying in an area that is going to improve, through government and private investment, (example: Long Island City (LIC)) at the very least you are getting yourself into the “growth stock”. And once people move in, grow roots, put money into their home, and retail businesses open up, they can’t just dump their “stock” and leave. Because one thing many folks forget about real estate is - it’s not very liquid. Not easy to sell. That’s why we, Realtors, still have a job