This is the 17th issue of The View from the Street.
Facebook, the Next AOL?
Last week’s IPO of Facebook got a lot of attention. The event did not live up to the hype but at the end of the day the market capitalization of the newly minted social media giant was a whopping $105 billion. In my opinion, five years down the road we will look back at the hoopla the same way we now view the fate of AOL. Amazingly, about 12 years ago, AOL’s market value was over $160 billion. The subsequent acquisition of Time Warner created a company with a market value of over $300 billion. The rest, as they say, is history. When a more modest AOL went public again late in 2009, the company was valued about $2.4 billion.
Celebrating One of the Most Important Laws in the History of the United States.
No, I’m not talking about the 2,700 pages of the Patient Protection and Affordable Care Act but the four (!) handwritten pages of the the Homestead Act of 1862. We are celebrating the Act’s 150th anniversary which was signed by Abraham Lincoln on May 20th, 1862. It made possible the westward expansion of the United States, and resulted in tens-of-thousands of people claiming and settling more than 270 million acres. Since then, the ability to legally acquire and hold title to real property has become one of the cornerstones of our society.
The significance of our ability to own real property as a necessary mechanism for capitalism to function is the topic of o The Mystery of Capital by Hernando De Soto. In it, the Peruvian economist points out that only the legalized and codified ownership of private property enables economic growth. In real estate the codifying takes the form of deeds and titles to property. Amazingly, the United States served as a model for the registration of title for European countries.
Back to the Basics of Home Ownership
Although the rate of home ownership in the U.S. is at its lowest in 15 years — about 65 percent, down from a record 69 percent in 1997, the benefits of owning real estate have not changed. With the excesses of the 2002–2007 years behind us when every Tom, Dick and Mary thought of themselves as a mini Donald Trump, we have come to view home ownership again as what it always was: the ability to do as you please within your own walls and enjoy significant tax benefits that renters don’t get.
Who Should Buy Now and Why
I’m not arguing everybody should buy now because interest rates are at record lows. Nor am I suggesting that everybody should buy because even in Seattle the home buying affordability index says so. What I am saying is that if you are in the position to take advantage of the very low rates and lowest home prices in years you should give it some serious thought.
- are planning to retire in the next 5 to 10 years (buy land now, build later)
- have a soon to be college-age son or daughter (buy a condo or small home)
- want to consolidate the family in one place (buy several homes or one large one)
- can work from home (escape the urban life)
- need to move to a larger home
- need to downsize
If you fit one of these profiles give me a call at 425–891-8213.
Finally, keep in mind that there is not a single property in all of Seattle that has lost as much in value as AOL.