Dear John: I enjoy your column.
However, I think you might be overlooking one thing. The housing market is artificial. There is a huge shadow inventory of foreclosed homes that the banks have not released yet.
Certain areas — like Las Vegas and Phoenix — have seen housing values skyrocket.
We should probably let the housing market correct itself (and not artificially) before asking people to invest their retirement money in real estate — although the stock market probably isn’t any safer. B.P.
Dear B.P. I’m not one of those saying that real estate has recovered. I think housing prices are still in the dumps and would be dumpier if not for all the investors looking to buy distressed property for a quick turnaround.
Why are investors piling into distressed real estate? Because there’s nothing else worth investing in right now. As you say, stocks are dangerous, and anyone looking to make a profit on his or her investments has to take enormous risk — speculating in things like commodities or art or real estate.
In fact, the shadow inventory of real estate held by banks isn’t the only problem as far as I’m concerned. There is also a five-year buildup of people who’d probably be thrilled to put their homes on the market.
These people — baby boomers who bought at lower prices — would love to move on to retirement. But the real-estate markets in most cities have been so bad for so long that these empty-nest boomers are stuck where they are.
When — or if — the housing market ever truly recovers, you can expect a lot of people to put their homes up for sale, which will make prices dip again.
That’s why I’m proposing that people be allowed to invest some of their retirement money in real estate.
First, it’s the right thing to do. Real estate is as much of an investment as stocks and bonds are. And it has the added benefit of actually providing people with some enjoyment.
Second, allowing this new class of real estate investor — people with adequate retirement money — will save the housing industry and the overall economy.
Or, of course, Washington can just keep doing what it is doing. We’ve seen how well that’s turning out.
Dear John: You are usually spot-on, but I fear that the cost of failure of your plan for allowing retirement savings to be invested in real estate would be just as costly as the Federal Reserve’s money-printing operation.
When a bunch of people make bad investments in real estate and retire with no savings, who do you think is going to bail them out? Our overlords in government, with the money coming from everyone else. And, of course, from the Fed’s printer; it’s unavoidable!
Maybe you’ve suggested some reasonable limitations to avoid such a scenario. A.S.
Dear A.S. Yes, we did suggest limitations. The main one is that only a percentage of a person’s retirement funds could be invested in real estate.
But even if my co-author and I hadn’t suggested limitations, don’t people have the right to invest their own money the way they want? Isn’t this what the call for privatizing Social Security is all about? Namely, allowing people to have a say over how their Social Security money is invested.
My last point: What if real estate goes up in value and people actually add to their assets? That’s the most likely scenario, since my plan would bring a lot of new buyers into the market.
Send your questions to Dear John, The NY Post, 1211 Ave. of the Americas, NY, NY 10036, or john.crudele@nypost.com.