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Back To The Future

You may have read my blog post on Forbes ranking Atlanta Real Estate #13 on the list of best cities to buy a home. After reading the article...I did a little poking around other news sites to see what they have to say about the Atlanta housing market. A few google searches later...I found an article over at CNN Money written in 2007 titled "How to Play The Real Estate Bounce Back."

An interesting subject for an article written in 2007, for sure. But it's the "sub heading" that really got me curious. Here's what it said:

The housing market may be melting down, but Business 2.0 worked with Moody's to identify 10 cities that have just about hit rock bottom - and offer opportunities for savvy investors to get in while the getting's good.

Wow. That's quite a statement. And the article went on to name Atlanta the #4 market to play "the real estate bounce back". Here's why:

Half a million dollars probably won't buy you a home in one of Atlanta's Martha Stewart-style neighborhoods. And that's a good thing, argues Dan Forsman, CEO of Prudential Atlanta. Forsman says the smart money here will move upmarket, in exactly the opposite direction of where it will go in New Orleans. A contrarian by nature, he sees the biggest arbitrage in properties priced at $750,000 in high-end communities northeast of the city - suburbs like Druid Hills, Duluth, Johns Creek, and Suwanee. The construction cost of a home in those pockets is $260 a square foot; right now, you can pick one off for $180.

Those same homes selling for $180 a square foot in 2007 are likely sitting on the market today at $115 to $130 a square foot. And the market here in Atlana has done everything but "bounce back". In fact, it wasn't until the stock market crashed in October of 2008 that our market really started to experience the steep declines in value that were already affecting most of the major Metro areas across the nation.

Now...I don't blame Mr. Forsman (CEO of Prudential Atlanta) for promoting buying and selling real estate. That's his job. And I don't blame him for coming up short on the predicting what would happen to the real estate market in the 2 years between his statement and today. Smarter people got it wrong.

But it's telling to me that this same sort of market prognisticating is alive an well in the real estate and financial reporting industry today. A sort of Ground Hog's Day approach of recycling old news to make is sound like new news.

I understand that you want to make finance entertaining, but it's not a game.
-John Stewart

The article in question - backed by Moody's - asserts that "savvy investors" should "get in while the gettings good". Now...for many national markets...2007 is looked to as the beginning of the steepest decline in the economy since the Great Depression. So, in essence, the worst real estate investing advice that could have been issued at the time. Hindsight being what it is, some might say this is an easy target. But this brings to mind the larger issue of whether the financial reporting industy (in this case, Business 2.0 and Moody's) is, as John Stewart so eloquently pointed out in a recent television interview with Jim Cramer (host of CNBC's "Mad Money"), ultimately in bed with the business it covers.

You can watch the hard hitting interview in it's unedited glory on Comedy Central's website.

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