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Orange on Green: Will Real Estate Ever Come Back?

Orange on Green:  Will Real Estate Ever Come Back? 
An industry professional in debt and investment management provides his thoughts regarding current real estate and what he believes the future holds. 


Recently, we met with Robert Koscik, director of investments and portfolio management for Park Avenue Securities in Cincinnati. Rob educates and guides many fellow Cincinnati residents as they prepare for their future endeavors, as well as with assisting them with managing their debt obligations. We asked the questions that many others have been curious to ask as they relate to homes, mortgages, and the future of real estate values.

 

Question: What are your general thoughts regarding real estate at this point?


Rob: We are not out of the woods yet. The normal progression with a bubble bursting has not been the same with real estate, mainly due to the government providing for incentives and adjusting interest rates to such a low rate. The pain that is normally felt has not been as badly widespread. In fact, homes are even more affordable now and monthly payments have been reduced significantly as a result of the interest rates.

 

Question: Have we as a society learned anything from the recent real estate struggles?


Rob: Not really. Many people did not have skin in the game. Often, they put zero-down to get in to their homes. As a result, many did not care about the home. They made their payments for a certain period of time, then lived there for free and were eventually forced out. They didn’t really lose anything when they foreclosed, except maybe for a tax and credit score consequence. I’m not minimizing the pain for those who are suffering, but there were way too many people that got out too easy. You know you can file bankruptcy in certain circumstances and still keep your home.

 

Question: Will real estate ever come back to what it was before?


 

Rob: Someday, but no time soon.

 

 

Question: Should it?

 

Rob: As a speculative investment, no. Real estate was used as a speculative investment. A house is a place to live. It can act as an asset, but not as a speculative asset. Compare it to investing where you may pay one percent to an investment manager for managing your money. In real estate you will pay six percent to get in, six percent to get out and at least one percent each year in property taxes. That is a costly investment.

   

Question: What percentage of people’s income should be allocated toward a home (including mortgage, taxes and insurance)?

 

Rob: 16 to 20 percent is acceptable.

 

Our take away from this discussion: If you are in the range of Rob’s suggestion above of 16 to 20 percent or lower, you probably aren’t worrying about much with your debt obligation. If you are considering buying a home, stick to the range. Be careful not to get caught up in the bigger and more expensive home that demands more cash flow. For those that are feeling the crunch, take it for what it is and make sure to learn from this experience.

 

Once again, this goes back to the fact that the best investment you can make today is in your knowledge. Become financially literate for a better future and pass the knowledge along to your children. Financial Illiteracy can be cured in Cincinnati by each of us committing to build our financial knowledge. Remember, knowledge is power.

Tom And Brad Cunningham -

Tom and Brad Cunningham are Cincy Chic's financial columnists, and they are the co-founders of Orangefinancial. If you want to share your comments or inquire for more information, e-mail them at This e-mail address is being protected from spambots. You need JavaScript enabled to view it and This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

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