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.

You should con­sider the cur­rent Seat­tle area real estate mar­ket an oppor­tu­nity if you

• 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.