A local real estate agent recently reported that sellers who couldn't sell last year are coming back to the market ..

and it seems this may be happening in other markets as well. Today, I came across this story from CNBC.com predicting a flood of home sellers coming to the market this spring. For real estate agents and the impulsive types who don't understand concepts such as dollar cost averaging or asset allocation they'll say this means it's a great time to buy real estate at Deep Creek Lake (as they have while prices declined and they have been in denial for the past several years). Others might question valuation of various asset classes before "investing" and choose to invest over time (using dollar cost averaging) as opposed to going all-in at today's prices. From what I have seen many giving "investment" advice fail to understand these concepts and therefore provide a disservice to their clients while lining their own pockets (sounds a lot like Bernie Madoff, doesn't it?).

If they want to compare Deep Creek real estate to the stock market, I propose having daily auctions of properties (this is how current stock prices are set if you didn't realize that) and then seeing how real estate prices fluctuate too. Afterall to have a liquid market you have to have transactions and based on the most recent month's data the Garrett County real estate market (where only 8 property transactions occurred) is far from a liquid market - suggesting that a dislocation exists between price and value. At this rate of sales it would take more than 6 1/2 years just to sell the properties currently listed for sale.

And as a final note, I am highly skeptical of any "data" on real estate "appreciation" during the great bubble which is likely still unwinding. As Robert Shiller has noted that only twice in history has real estate produced outstanding returns: once immediately following WWII and the recent unstainable credit driven bubble (1999-2006). He's also shown that going back to 1890, housing returns average more like 3% per year, so if you want to base future expected returns on the unstainable gains of a short-term bubble be my guest but do so with extreme caution and full awareness of the risk you incur in making such assumptions. As I have noted before, many trying to sell you on a get rich quick scheme try to tout the best case scenario while sweeping aside the risks. Buyer beware.

Don't forget to check back to Dan's Deep Creek Blog for future updates.