Economic State Of The Current Real Esate Market
Hey All,
Interested in everyone opinions on the current economic state of the real estate market ( short/medium/long term) and strategies to employ. What do U think rates are really going do? Do think home prices will drop in the next 6 mos?? All insights welcome. Finally what is the best link on TCI to get info on this and which forum host discussions on this??
THX
Mike
think real estate market is somewhat predictable. If you can make an educated decision where the next growth would be, then you know where to buy real estate.
The strategy is "Look for growth".
Real estate does have bubbles, in my opinion. Here is an example of one:
Bay Area, California. For 30 years it experienced steady appreciation of 6-7% a year and then, with dotcom boom prices jumped to the sky, and by the way still climbing up now. Ask me why?
Bay Area lost 300,000 jobs; salaries went down 20%; unemployement. Why prices are so high?
Two words for you: Interest Rates.
Another reason: Unstable stock market, people have money that they want to invest and not everybody has time to analize things (just like with stock market) and people buy blindly.
Another reason: Immigration. Immigrants bring cash in suitcases and buy. They do not buy in Indiana, they buy in California and/or Florida.
Let's think a little about what can make real estate collapse?
1. Rising interest rates. Prices will definetely go down when it happens. There will be a rain of foreclosures 2 years from now: many of those who took ARM (adjustable rate mortgage) will default. People will sell for less then they boought. It happens already on hi end properties that were bought in 2000.
2. Stock market - I do not know much about, but based on Kiyosaki's "Profecy" this will fall even more when baby-boomers pull out their retirement funds. May be you can tell us more.
3. Immigration legal and illegal. Watch our government. If for security reasons we will close and patrol our borders, then sell all your properties or you'll lose your money.
Here is an opinion of Sir John Templeton
http://moneycentral.msn.com/content/P52744.asp
There are books written about strategies, one of them I like is by David Sirota "Essentials of Real Estate Investment"
These are my 2 cents.