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| From the Editor: Worthy Notions |
The Opportunity of Land
Dwight Cass
06/01/2004
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Homes and Heritage
Beyond this, for many of us, land represents more than
simply another asset class to be wedged in our portfolio. It may form a
cornerstone to a family legacy—in some cases, one dating back centuries. It
often plays a central role in defining who we are, and is therefore crucial to
maintaining our family’s cohesion and achieving our goals.
But the fact that
real estate is an investment, and one subject to the vicissitudes of the market,
must, unfortunately be borne in mind. Since it often comprises a large part of
the value of our estates, we need to evaluate and manage it responsibly. Its
robust performance during the post-bubble malaise has been a source of comfort.
However, those of us now importuned by developers may wonder if they will fall
silent when interest rates begin to rise and the markets for housing and
commercial real estate begin to cool.
This is not a distant concern. On the
morning this issue went to press, the government released the core consumer
price index for March; it was twice as high as expected, and interest rates
immediately (though no doubt temporarily) jumped in response. Longer-term
rates—those that actually bear on the mortgage market’s behavior more than the
short-term levers manipulated by the Fed—are expected to trend higher soon. They
have been artificially depressed by foreign central banks, especially the Bank
of Japan, which have purchased U.S. Treasuries as part of their strategies to
manage their currencies.
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