When One is Not Enough

How many people do you know who have gone into the stock market and bought one security, other than the company they work for, and never considered buying another share of another company? How many stamp collectors do you know who have one stamp? Art aficionados who own one painting? I believe you get my point.

What about housing? Why should you limit yourself to one house (finances aside for this point of the discussion)? Who says you can't have a second home, a rental property, a vacation place? More importantly, have you considered the upside of additional real estate from a utility, enjoyment and financial stand point? Enough questions, lets look at some of the answers.

About 2/3 of American citizens own their home, leaving 1/3 to either live with an owner or rent. Residential real estate was never considered an "investment," specifically one's home, until inflation and the baby boomers arrived in the 1970s. We had a demand-pull inflation created by excess demand for houses by an unusually large group of people forming families at one time without enough supply.

Voila, prices in desirable areas started increasing. The rest is history. In that history are thousands of stories of people becoming fabulously wealthy simply owning their own home and eventually selling it for previously unthinkable profits.

I must note here, not every area in the country had the amazing increase in housing prices found on the two coasts, sunbelt, specific sections in various states in the continental 48, Hawaii and Alaska. Not to say that special areas in every state do not exist where the demand for residential real estate far exceeds the supply and is reflected in the prices. If you are not looking in these areas, you can easily miss them.

I grew up in Southern California, about 20 minutes from the Pacific Ocean. Nine of us started hanging together in high school and the group still exists today. None of us ever considered buying a house at the ocean's shore. Two who became doctors now live by the sea in Hawaii, another who also became a doctor eventually bought a house by the ocean in Orange County and a fourth who became a builder bought a second home at the beach in Orange County as well. Our oversight was very costly. Had we seen what those who came from other parts of the country without an ocean had seen, a uniqueness that is both desirable and scarce, we could have captured ocean front properties at land locked prices. Who knew?

One important point at the crux of this discussion is real estate, as with any other investment, does not go straight up or straight down, but has over the modern history of our nation, maintained an upward bias.