What do Costco, Microsoft, Proctor & Gamble, and LinkedIn have in common?

To understand this commonality, let’s shift our weekly focus to something near and dear to everyone’s day-to-day experience…

How is the current economy impacting us today and is there an opportunity?

?Ask your neighbor on the street (assuming you’ve left your home office and have re-learned social interaction, aka in-person) or ping someone in your slack channel (because you haven’t left your home office in a couple years) about their view of how the economy is impacting them right now.?

The typical response is ‘everything costs more’ or they may even go on to say that ‘they feel poorer’, or even, ‘a victim of this economy’.

Given their perspective, everywhere they turn nearly everything does have a higher price than 12 or 24 months ago.??

So are they right in their assessment??

The simple answer is yes and the complex answer is maybe.?

For the typical consumer and property owner, prices have gone up, inflation has eroded purchasing power, access to capital (borrowing) is either reduced or much more expensive, and personal income has not likely kept pace with CPI.?

Rolling all these factors together, it is easy to see why they feel the way they do and difficult to disagree with.?

When inflation rises, purchasing power is reduced.?

When interest rates rise, the cost of capital also rises.?

As the cost of capital rises, affordability (especially when supported with debt) declines.?

And then there is personal income, which typically lags in inflationary times and translates to everything costing more because they are not keeping up.?

For the vast majority of your neighbors, they are completely dependent on their employment earnings (whether salary or hourly).?

Yet, for a minority of your neighbors, they are either not dependent on traditional corporate employment earnings or their dependency on corporate employment is significantly less because they have cultivated additional source(s) of income.??

Digging a little deeper, one may begin to see that a minority of your neighbors have already or?are beginning to uncover opportunities that cannot be seen by everyone.?

Why is this you ask??

Namely because increasingly difficult times cause dislocation and to see opportunities that dislocation opens up, requires a contrarian view.

Reflecting back on the period of 2005 to 2007, considered an exuberant time for the real estate market, there was still 1-2% of housing inventory in foreclosure.?

Yet this was unknown to the majority of the market because it was difficult to see in abundance of news reporting month-over-month record-setting prices.?

Yet, at any point in time, people and property owners are experiencing death, disease, divorce, and distress because life intersects real estate infrequently, and does so in grand fashion.??

Similarly, as prices of primary goods and services rise, there will always be some people, property owners and businesses in the market who cannot adjust to the higher input costs they are subjected to.?

This difficulty to adjust forces some to consider exiting even when the timing is not ideal.?

In the midst of a weaker economic climate, their pricing power is significantly reduced which opens up a buying possibility for those who have remained resilient and resourceful.?

One’s pain may be another’s prosperity.

So what do Costco, Microsoft, Proctor & Gamble, and LinkedIn have in common?

This short list of companies, from a much larger list, was launched during a recession or economic decline.?

Stated another way, 50% of the Fortune 500 were founded during a bear market or recession.?

In the midst of adversity and otherwise undesirable market conditions, the very conditions that many labeled as unfavorable or difficult, were the soil for significant growth.?

The maxim, ‘Tough Times don’t last, but Tough People Do’, is more true now than ever before.??

How does that apply to real estate???

In this period of dislocation, where sellers want yesterday’s sales prices and buyers want 2024 offering prices, fortune favors the persistent and the bold.?

These disadvantageous times are not unfair, they are universal.?

For those that navigate a course forward in these less favorable times of adversarial growth, the extent of the struggle is the extent of the growth and success that will yield prosperity going forward.

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