The Numbers Are Not Always What They Seem....

Numbers can be misleading. For example, the stock market has been up over 10% thus far this year. That is great news for those who bought stocks last year. As a matter of fact, stocks are up a huge 125% from the lows hit during the financial crisis four years ago. That is a great rate of return for those who purchased stocks at that time. On the other hand, if you purchased stocks at the peak five and one-half years ago, the returns would have been close to nothing. Let's add one more level of analysis. If you purchased stocks twenty years ago, the Dow is up more than 400%. We can say the same thing about housing prices. Last year, median home prices rose to almost $180,000 -- up 10% in the past year.

On the other hand, the median home price was almost $220,000 in 2005. Twenty years ago? The median home price was hovering just over $100,000. Obviously, which stock you purchased or which home you purchased will have a big factor in your rate of gain. Different stock sectors and different geographic locations have performed very differently over time. Here we are only taking into account time. Timing any market should be left to professionals and even they are often wrong. Those who are looking to time their purchase of real estate or stocks to get in at the right moment are much more likely to be wrong. The right moment was twenty years ago. Today is likely to be the right moment twenty years from now. The key is a long-term mentality and then you can take the day-to-day or year-to-year out of the equation. Numbers are not always what they seem to be when you look at the small picture. The employment numbers released this week can have an important affect upon what will happen Friday and next week. But not twenty years from now.

 

Mike Ervin

Senior Mortgage Banker

PH: 650-735-5261

CEL: 650-766-8500

NMLS # 282715
mike@mikeervin.com