Real Estate Ebbs and Flows

Perhaps, more of an essay of thought than the technical description of an article, regarding my view of the exciting real estate days to come....



I think there might be another person out there that would agree that we are sitting inside a strong sellers market today. Prices are ridiculously high and continue to press upward, interest rates staggeringly low: people are selling to reap their mighty gains, others are refinancing to cash out and take advantage of the rates - lenders are firing on all cylinders to keep up with the demand. It's cool to stand back and take it all in, watching what 2 years can do to history.



So, I look back at what caused this real estate boom. Well, the 90's were a decade of what seemed like, in retrospect, false economic security. There was wartime in the early 90's, foreclosures were easily found, real estate boomed. Then the tech-slam of the mid-to-late 90's sent everyone to the stockmarket, dumping every penny in and expecting to become instant millionaires. People were pulling money out of real estate investments to cash in on the dotcom's. Some millionaires were made men during those times, living high on the hog with no end in sight.

(I can't help but to laugh when I think of the saying I've read on TCI, "Pigs get fat, hogs get slaughtered").



Poof! And that's what happened. The hogs got slaughtered.

We got a new US President, dotcom's started to fall apart, our country was torn from it's comfortable safe place on 9/11, Enron scandal, Martha got nabbed - this was 2001. We were so afraid of what might happen on the eve of the millenium that we forgot what could happen in a regular day at the office. And 2001, was the regular day at the office. And so changed the economy and the way people looked at investing.



Big, big bucks were lost in the stock market by individual investors. They felt a loss of control and lack of trust for that system of investing. Those with any money left, pulled it out and started to dump into real estate - a personally controlled asset/investment. Whew. A massive sigh of relief to investors - and the prices went up. So more investors thought, "Hey, look what's happening in real estate, maybe I should get in on this". And away the market goes. Amazing the little lemmings, how they follow the pack.



The investors keep investing, everybody is refinancing, the lenders keep lending at 90%, 100% LTV. They see no harm, little risk - all they see is $ signs blinding their reality, (hog mentality), real estate agents keep telling clients, perhaps wishful thinking, that the prices will continue to go up at the current pace..........(Now what was it that happened just a few years back with the tech/dotcom boom? Or any 'boom' in history? - Think, think hard, now).



So, there's the hoggy/greed factor, history, an election year upon us, an then the denial of the masses that it could happen - - -



It's reality. It's economic trend. How many people can continue to purchase properties that they can't really afford? (Right now where I live, only 11% of people can afford the median priced home). How many investors will continue to be able to afford negative cash flow or properties that if the economy changes will produce lower rents? (But then again, when tons of new homeowners are foreclosed on, the rental market may boom with displaced homeowners). How many millions of RE loans have been written in the last 24-36 months? Percentages alone will lay out a huge foreclosure market on the horizon.



What will happen in the real estate market in the months and years ahead? Noone knows for sure. But I would bet a buck that the real estate investor's dream market is impending.



Mental notes for myself:

1) Leave good equity in every property I plan on keeping over 6 months cause I don't know where the market may go and this gives me a safety net.



2) This is an election year. Hold off on mid/long term investments that I might need huge economy-based equity gains to profit.



3) Sell properties now that I might have intended to sell sometime during the next 12 -24 months.



4) Refi any props now that I intend to hold longer than 6 months. Leave good equity in place.



5) Stockpile some cash, get credit rating to maximum possible, keep looking for steal-deals and wait out the turn of the RE world.



6) When the RE market starts to shift down, continue to seek the best deals and wait for the low to pounce.



Some of my gentle readers make think I am mad. Perhaps I am. But I remind myself that I was one of the few 'instinctive' stock market investors that liquidated assets January 2001 and didn't lose anything. I feel it coming.......the REAL real estate boom, for investors in on the forefront.



The simple saying, 'Buy low, sell high', is what we live for, right? So, I am selling some, (not all - keep the really good income stuff), off now and looking for mega-steals in the short term. Cause I know, deep down inside my gut, that a strong, strong buyers market is coming.



When? Well, who knows for sure what will happen in the real estate market, right? I sit back and take it all in: the history, the trend, the reality. It's so exciting for me as a real estate investor that I could spit. Too many loans, prices out of control, somethin's gotta give. I will be poised and ready to strike.



Maybe the end of springtime will show a leveling of prices. I will start to see more and more, "For Sale" signs up. Ads in the real estate section of the paper with lengthen. Prices in RE ads will start stating, "reduced price", "seller motivated". Maybe I'll keep a little log each week, over the next couple of months that lists how many times I see the words, 'reduced price', or other indications of sellers that want to exit stage left that I haven't seen in recent years. Maybe it will take until the end of the year, (post election), to see a dramatic change. Probably not, for my area.



When it starts to happen, I will continue to seek out the strongest deals of course, cause it will take another year or so before the really smokin' deals present themselves. At some point down the road, all these ga-zillions of RE loans that are being written now will hit the fan. Even without a change in the RE market, with this many loans outgoing there will have to be significant foreclosures.



Again, perhaps I am mad. Perhaps only wishful thinking. But when my gut talks, I listen. Oh, such an exciting time to be a real estate investor - cause the ebb's-a-comin'. And it's gonna be a big one.