the only people that will end up profiting in this bubble are the commission agents and builders... i saw a clip of what basically sums it up for the average household.... a woman bought a home X years ago for $100,000 and it is now worth $300,000 ... and cashed out of the bubble, right? so i thought... at the end of the clip we learn that she now took the $300,000 and bought a bigger, more expensive home.... so the bubble continues. in the housing market it is really hard to turn paper profits into cash.... if u sell your home where are u going to live? rent? what about for a family with children? the places with good schools and safe are all "hot" areas......
Yet even if there are temporary disruptions, the end of the housing boom may be good news for the overall economy. The U.S. doesn't need to drive growth with ornate new homes and elaborate kitchens with expensive marble counters. Instead, a shift away from housing could free up hundreds of billions of dollars for other, more productive investments. haha... yeah, right. once people get a taste of luxury it's not going to be easy to forget about it so easily... people's sentiment will change from consumer to saver once they cant afford the 'ornate' new homes... maybe it's like driving a benz then having to drive a pinto. really doubt there will be billions of dollars invested then.
Could you speculate how our aging population in the USA, plays into all of this? Honest question...Do older people save more or less than younger people? Anybody? haha... yeah, right. once people get a taste of luxury it's not going to be easy to forget about it so easily... people's sentiment will change from consumer to saver once they cant afford the 'ornate' new homes... maybe it's like driving a benz then having to drive a pinto. really doubt there will be billions of dollars invested then.
I understand your approach to buying investment properties. Are you finding anything to buy in this market? And would you apply the same criteria if you were buying a place to live in?
I have not bought anything in the last couple of years. But in my area I think a guy could still buy property according to my criteria. You know, I was living in S. California both before and after the last peak in real estate prices around 1990. I was able to find property in that market in the bull market prior to 1990, and especially in the down market after 1990. The post 1990 era was quite lucrative to someone who could work out financial problems with the lenders. Each market has it's advantages. For instance, in the bull market climate it's easy to find buyers when you have a property, it's more difficult to find the property. Not impossible though. The basic situation I have had the most success with is one in which the seller has to sell quickly, meaning in a few days, such that the only means of buying the property is cash. This eliminates many of the conventional types of buyers. Also the more repairs the property needs the better, because this means the seller may not be able to sell to someone who's getting a loan, because the lender will not lend on a property needing too many repairs. These types of situations exist in every market, even the hot ones. The thing is they are not easy to find. But once you have one you are assurred a profit because the buyers are out in force. In a down market there are all kinds of deals. But you have to be careful because there are not many buyers. So you have to have more rigid criteria, only cherry picking the very best deals so that you can price them in a way that is appealing to the more limited number of buyers. When you are looking for an investment property you are usually looking for a "motivated seller". This means the guy has to sell quickly for some reason. Or, he has a property which is in such distress that it cannot be sold conventionally. So in a sense you are not looking for a property, you are looking for a particular type of seller. On the other hand, when you're looking for a home to live in, normally you are looking for a particular type of house....and this is normally not consistent with an investment because the odds are that the seller of this house will not be motivated sufficiently to sell at the type of price you would need to make it a good investment. I think one of the best avenues though for a homeowner might be to try to locate a fixer upper type of property, provided you feel you can deal with contractors (a difficult task at best). For properties needing signficant work you might be able to negoatiate a deal such that when you fixed it up you would have a built in profit in your deal. After owning it and living in it for 2 years you could then sell without tax up to $500K. But it's not generally easy to find the fixers in a neighborhood that you prefer. Generally they are located some place you don't want to live. Areas that I have been able to buy properties in the past have been foreclosures, tax sale property, property on a violation list with the city, or boarded up due to drug problems, landlords involved in an eviction, and landlords whose property has been torn up. This is just a partial list, but you can probably see why each of these might be particularly motivated and in a different position than the average seller. These problems don't go away just because there is a bull market in real estate. But what does happen is that there is much more competition out there searching for property. Coming back to your question, it is probably going to be quite difficult to apply an investment criteria to a place you want to live in unless you have plenty of time and patience. The basic problem is that most of the sellers are not motivated, and that is the key to making a great real estate deal. Hope this helps to some degree. OldTrader
Oldtrader, You could write a book and hold seminars on this subject...seriously..(you know your shit) Michael B. P.S. I just keep buying properties and live in them while selling them. Then I stopped and payed the tax, and went full circle, and now live in a 800 sq. ft. apartment for $667.00/mo. (including loft). Without bragging, I am working on Wify's and my retirement, now. I am having a lot of fun trading Forex...yes Forex, I know... P.S. I once tried the rental route with more than one house, I did not like to be a landlord.
Re;RE ======= Good ones oldTrader; and speaking of other side of the trade here are 4 more ways to lose money. 1]Buy in an area thats slowly deteriorating..... 2] Buy at inflated prices..... 3] Get personaly overextended..... 4] Poor initial selection.....-William O'Neil Book
one scenario is that if the 30 year fixed goes from 5.5% to 8%, many things will have happened. what would it take for the long yield in treasuries to have shot up so that mortgage rates would climb. an 8% mortgage rate could be correlated with an economic boon, where bond prices pop and stocks inflate. we could very well see an enormous rise in the equity markets as real estate wanes. rotation. another scenario is that we experience massive inflation and we enter a depression. imho, i don't see that happening.