One of the first apartments I sold in my career was a beautiful 1850 square ft loft in SoHo. My client, Pat had lived there most of her adult life and was selling her home because she was retiring to Maine to run her publishing company. She had originally purchased the loft for less than $200k and I sold the loft for her for $600k. A 300% return. That same year, in 1996, the DOW Jones Industrial Average was trading at 6000 points. I always loved showing that loft. When you show enough homes, you realize that every home has its own energy. Some people describe this as feng shui, others might describe it as a feeling the space gives you. Pat’s home had a special quality about it and when you walked through the front door, you were bathed in positive energy. The finishes in the loft were very basic but the scale of the rooms, the ceiling height, the size of the windows, the light and air, and the orientation of the space made the loft feel incredibly special. I always had a smile on my face when I visited Pat. How do you value a home that puts a smile on your face vs a home that doesn’t? There’s no algorithm for that, but it is almost always reflected in the price and velocity of the sale.
The loft was on the market for a very brief time, and I sold it for full asking price. Pat moved to her new home in Maine, and the new owners moved in. They sold the loft ten years later for $1.6M. A 266% return. That same year, in 2006, the DOW Jones Industrial Average was trading at 11400 points. A 190% return during the same time period. The new owners of Pat’s loft lived there for 12 years and eventually sold the home for $2.6M. A 62% return for them. On the same day, in 2018, the DOW was trading at 26000 and in the middle of the greatest bull market of our generation. A 228% appreciation during the same period. If the current owners of Pat’s loft called me today to sell it for them, in the midst of this pandemic, I estimate that we would find a buyer relatively quickly for over $3M. 500% above Pat’s original sale. The DOW is currently trading at around 24000 points. 400% above the level it was trading when Pat sold her apartment.
People are continually asking me about the value of their homes relative to the other investments they have made. Markets are impossible to predict and as you can see from the above case study, they don’t always act in tandem. One investment will probably outperform another at different times. When it comes to investing, the principle is simple, and timing of your purchase and sale will determine your result. The reasons to invest in the stock market are clearly very different to the reasons you’d buy a home. Now, more than ever is a time where everyone is looking closely at how much money they have and where they should be putting it. Every penny counts. History has shown us that investing in real estate is sound relative to the performance of the DOW. The big question you have to ask yourself is how much value you are putting on the feeling you get when you walk into a home that puts a smile on your face and makes you feel at peace.