Posted: May 14, 2008
We are in the midst of tough real estate recession; the worst this country has seen in decades. Real estate prices in some areas have fallen to the point where many people are paying more on a mortgage than their property is actually worth!
In February 2008 the Standard & Poor’s/Case-Shiller home price index of 20 major cities fell by 12.7% over the previous 12 month period, the largest decline since its inception in 2001. Seventeen of these 20 major metro areas reported record annual declines.
A number of builders and developers around the country have gone bankrupt or are on their way to bankruptcy; and in this market, size does not matter! All around the country there are various developments that are “unfinished”. Some projects appear as ghost towns. Thousands of new construction homes are completed and empty; others are unfinished and empty.
Inventory levels are at or near all time highs (depending on market location). This coupled with lack of buyers is putting a downward pressure on prices and causing more owners/investors to foreclose on their properties. Foreclosures in turn are mounting and causing banks to lower prices to produce sales. This pulls down the prices of neighboring housing and puts pressure on sellers hoping to sell in this market. It is a vicious cycle that needs immediate intervention so it does not continue to erode values and compound the problem.
Is the blood in the streets yet? YES. It is pouring out. It is painful. Rothschild said, “BUY when the blood is in the streets!” Although he was primarily talking about buying stocks when everyone was selling into fear, his point is right on and applies to buying anything when others are selling in fear.
The market will recover. Good times will return. Buying when times are tough, when times are fearful, when everyone is selling and when blood is in the streets, is the right time to buy. Why? Because very few buy in times such as this; yet this is where the deals are found.
It is always exciting when everyone is buying – like it was 2 to 3 years ago. But too much excitement drove prices up too fast. Most all Americans – me included – got caught in the buying frenzy. Now it is tough. It was easy to jump on and buy then. I bought more properties in 2005-2006 than ever! I feel it now. All of us felt the market had “legs to run” more and more. We were wrong. Hind sight is 20/20 is it not?
Aside of those mistakes, as is clearly seen in the rear view mirror, now represents a totally different “opportunity” than existed then. It is NOT POPULAR to buy today. No one is talking about making money in real estate today. It is a topic of sour grapes; better not bring it up. But the few wise investors that see the big picture are out today, hunting; they’re looking for outstanding buys on real estate that is on sale… real estate that has all the fundamentals in place: Great location! Cash flow! Excellent tax benefits! These deals exist today, where they did not exist a few years ago!
Opportunity! With housing prices that have corrected significantly and interest rates still near historical lows, this is the perfect time to find good real estate deals and buy cheap. Your goal should be to find investment opportunities in markets that offer the greatest long term growth and stability. These are markets that show growth in employment and population.
Target properties that you intent to hold for a long period of time. You will gain equity through appreciation as the markets recover and grow over time. Be sure to only invest in properties that provide a positive cash flow in order to cover all of your operating expenses. This is very important in order to be able to hold the property long enough to benefit from the appreciation that comes over time with real estate.
On the flip side, this is not really a good time to sell. If you own real estate, it probably makes the most sense to hold onto your investment until the market rebounds. As always, it will.
In the meantime, take advantage of the market by either refinancing your own properties for lower rates and better terms, or buy more property that you can rent with a positive cash flow.
Remember that everyone needs a place to live. You should take advantage of these low mortgage rates and the abundant array of good deals to be found from motivated sellers, foreclosures, and builder liquidations. You will find buying incentives all around you, including the huge demand for rental units today!
Commenting is closed for this article.
Our nation is at an interesting juncture. Our economy and banking system is under incredible pressure; one of a serious nature.
The mortgages which were written between 2004 and 2006 paved the way for the collapse in real estate prices, which in turn has been pulling down all other areas of the U.S. economy. Currently there are over 1 million foreclosures across America. The frightening fact is that there are more than 6 million mortgages that are 30 days or more in arrears! This is potentially more serious than anything we’ve seen yet.
Posted: Sep 25, 2008
We are in the midst of tough real estate recession; the worst this country has seen in decades. Real estate prices in some areas have fallen to the point where many people are paying more on a mortgage than their property is actually worth!
Posted: May 14, 2008
©The Scislow Group, Inc 2007 All Rights Reserved
