During the last few days of reading and proofing the list and stories associated with our annual Housing Giants report, I came across this article headline on the Web, published by Bloomberg Business: “New York Apartments, Art, Top Gold as Stores of Wealth, says Fink.” That’s interesting, I thought. Someone thinks apartments are even better than gold as a safe place to put the money that you’ve earned and saved, one that will hold its value and won’t be subject, for example, to the wild swings of the stock market.
Well, OK, maybe in New York, they might be. Apartments in Manhattan are, after all, finite in quantity and there is plenty of demand for them. In reading the article I learned that the gentleman mentioned in its title is none other than Laurence Fink, the CEO of BlackRock, the world’s largest money manager. According to Forbes, the company’s clients include Her Majesty’s Treasury, the Federal Reserve Bank of New York, AT&T, and Google. Moreover, Forbes says, “Fink’s decisions have a huge impact on the retirement savings of millions of workers—93% of the largest U.S. retirement plans are managed by BlackRock.”
Then I read the actual quote from Fink: “The two greatest stores of wealth internationally today [are] contemporary art … and I don’t mean that as a joke, I mean that as a serious asset class. And two, the other store of wealth today is apartments in Manhattan, apartments in Vancouver, in London.”
Vancouver? Where the average price of a single-family home exceeds $1 million? Has Fink not heard of Canada’s housing bubble? Or that Canadian housing prices are thought to be overvalued by 35 percent and that Vancouver is currently second on the list of the most unaffordable cities in the world, after Hong Kong?
Vancouver’s home prices have been run up by large numbers of international investors, mostly from China, looking to shelter their cash in Western real estate, in part, it is said, due to an anti-graft campaign in Beijing. What happens when the bubble bursts, as they have been known to do? Or some other reason precipitates an exodus of foreign capital? Florida is already starting to see a sell-off of real estate purchased by foreign buyers, driven by the changing value of the dollar compared with the Euro.
With his remarks, Fink may not have intended to advocate this strategy for individuals looking for safe harbor for their hard-earned dough, but referring to it as a “serious asset class” could be construed as a recommendation.
The idea of houses as investments has done us no favors in this country. During the boom, that idea was taken to its fateful conclusion. Too many people invested in houses the same way they do in the stock market when they choose the companies in which to invest. They bought high and sold low. Very low, in too many cases.
By the same token, a number of Millennials have said that they don’t intend to buy houses because they are not a good investment. And they’re right. Houses will not build wealth for you the way that stocks and bonds can.
But houses are a good investment in other ways. When you buy a home, you are investing in the community in which you’ve chosen to live, its roads, its schools, its parks, its local businesses. And perhaps more importantly, it’s an investment in your family’s security. They have a place to live that’s theirs. Owning a home may not offer the same returns that the stock market does, but what it does provide is worth its weight in gold, art, or apartments.