Now, What Are You Going to Do About It?
It looks like the rest of the country is finally waking up to the fact that yes, we really ARE in a recession in the US. A recession that is being led by the decline in real estate values. How can that be, you say. Real estate, while a large and important part of the overall economy, does NOT have the power, by itself, to drive us into a recession.
Quite right. Read on.
It’s actually not too difficult to understand how this happened. At present we have the largest economy in the world. An economy that’s fueled by consumer consumption of everything from Vente Lattes to plasma tvs to Hummers. The problem has been, though, that as a country we have been increasing our consumption and spending at a faster rate than out incomes have been rising, and so for the last decade and a half we have been funding our consumption habit by continuously borrowing against the steadily increasing value of our homes. That all works just dandy in the short term until – you guessed it – home values stop rising.
Now everything would have worked just fine if, three years or so ago when home values stopped increasing, we all stopped consuming everything in sight through the use of plastic. The problem would have worked itself out, the economy would have had, as they say, a “soft” landing. We would have had a temporary dip, recovered, and then all gone on with our lives.
But this is the US. Our national motto is “Live Beyond Your Means”. It should be on our currency.
As a real estate investor I can tell you from first hand experience that people are STILL in denial, TODAY, about the problems in the real estate market. It’s not really that these people disbelieve the evidence that’s staring them in the face. No. They believe the evidence but as a rule they ALL think that their home is the lone exception.
The net result is exactly what we’re seeing today. Consumers in denial continued to do what they do best – consume – even in the face of leveling and then declining home prices. Many thousands didn’t get religion on this until it was far too late – when they tried to refinance and couldn’t – and are now saddled not only with mortgage balances that are higher than their home values, but also piles of extraordinarily-high-interest-rate credit card debt that they have no hope of getting out from under until – you guessed right again – homes appreciate in value again.
So what we’re seeing now is the emergency brake being applied to consumption spending. This is a bad thing. For pretty much all areas of the economy.
When people stop spending, companies stop making things. When companies stop making things people then lose their jobs. And when people lose their jobs – they lose their homes. That puts an even heavier strain on a real estate market that’s already reeling from the flood of foreclosures that are clogging it up.
Just how bad is the housing market?
An article in the NY Times pointed out a couple of interesting things today:
The Joint Economic Committee of Congress predicts about two million foreclosures by the end of next year on homes purchased with subprime mortgages
There will be a decline of $917 million in lost property tax revenue to state and local governments, which will also have to spend more on policing neighborhoods with vacant homes.
In next 18 months, interest rates on more than two million homes loans will reset to higher adjustable rates.
Inventories of unsold existing homes rose last month to their highest level in almost 20 years.
So what does all of this mean? Well, it all depends on your perspective.
If you’re someone that has been living large on your home equity loan – the party’s over my friend. Best for you to sit on the sidelines – NOT consuming – and try to ride this thing out. Pay your minimum payments on all of your plastic and tread water for a while. You won’t get anywhere, but you won’t drown either. Good thing there’s a new version of Halo out.
If however, you haven’t squandered the crown jewels, then you need to jump into this real estate market TODAY. There has never been a better buyer’s market than there is right now, and the next couple of months before year-end are going to be the most extraordinary ever in the history of the area.
I’m already seeing this manifest itself on several fronts. Foreclosure Asset Management companies are more and more willing to negotiate; Short Sale Loss Mitigation Officers are calling me instead of vice versa, and what’s been most unbelievable of all – I’m now finding MLS listed properties – these are completely updated, occupied, non-foreclosure homes – at prices around where I bought foreclosures last year.
I’m negotiating one like this as we speak that, as a matter of fact, is in such good condition that I could have my renters move in the day after the current owners move out. You’ve heard about no rehab properties – this is the poster child in that it literally needs no rehab whatsoever, not even paint. AND it meets my #1 criteria for rentals – I can refi and get ALL of my money out and still have it cash flow.
You know what the best part is? I’ve found two more just like it.
This truly is a once in a lifetime opportunity to build a real estate portfolio and set yourself up financially.
What are you going to do about it? Why aren’t you already involved?
If you’re like most people in this area, like my brother, you are simply going to play turtle and bury your gold pieces in the ground like the servant in the new testament parable. When it’s all done you’ll breathe a sigh of relief that you “made it through” without losing anything.
But is playing not to lose the way to play the game of life?
I don’t think so. You don’t get ahead that way, and worst of all, you will have squandered an opportunity to see how much you could have achieved had you simply tried.
What a waste.
For those that are interested but don’t know how to get started – visit my website at www.ForeclosureConcierge.com and request my special report that will show you how.