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How the Dow Jones Drop Impacts Commercial Real Estate Brokers

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It is fair to say this was a wild week in the stock market, one we haven’t seen in over two years – since the Dow’s last major correction. If you are heavily invested in the stock market, you may have turned in bed a few more times than usual, but probably didn’t lose too much sleep. Or at least you shouldn’t have. This week was a natural (and well-needed) correction; says most economists, investment advisors, and self-proclaimed financial guru’s who have been forecasting this week for the past 8 years.

As reported by Bloomberg News this week, outgoing Federal Reserve Chair Janet Yellen said U.S. stocks and commercial real estate prices are elevated, but stopped short of saying those markets are in a bubble:

Well, I don’t want to say too high. But I do want to say high, price-earnings ratios are near the high end of their historical ranges.” Commercial real estate prices are now “quite high relative to rents. Now, is that a bubble or is it too high? And there it’s very hard to tell. But it is a source of some concern that asset valuations are so high.

No doubt “high real estate prices” translates to your investors and potential sellers standing on the sideline waiting for a correction in property values. It means, rents are too high for your tenants to move, or for your landlords to fill their space. Ultimately, this means less velocity in the market, and less commission income for you. Sucks, doesn’t it?

Now, look at this in terms of your stock portfolio. Did we all lose money this week? I did. But really, I didn’t lose any money. My portfolio lost value, but I’m not selling – so I didn’t realize any loses. In fact, I am buying more today at lower prices. The point is this: top producers don’t live by the transaction – they build sustainable businesses for all market cycles. Like the stock market, we are in an unprecedented run with commercial real estate values. We will (more than likely) experience a correction in the next 2 years. Are you prepared for this correction, or are you still living paycheck to paycheck, or in our world commission by commission?

If you haven’t already – it’s time to start building your own sustainable practice, a practice that will allow you to thrive in any market. Think back to the most successful brokers you knew in 2008 – more than likely they are still around today, and still market leaders. These brokers don’t live by the transaction, they build personal real estate practices that soften the blow of any corrections and continue to grow their income regardless of market cycles.

If you would like to explore options for building your own personal commercial real estate practice, please visit us at MassimoCRE.Coach.

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