I just can’t believe that even after all of 2006 nobody seems to know for sure where the housing market is headed. I still hear people saying that the housing market could crash or prices could fall another 20%. Some seem to think that the worst is over. I sure wish I knew. It’s scary buying real estate when so many people say that the market is crashing. What if you buy a house and then next year you can’t even sell it for what you paid?? Does anybody even have a clue or are we all just gambling??
No one seems to have a working crystal ball. I’m still writing up offers though, people still need a place to live and it’s not a gamble if you need to live someplace. Even with a 5-10% price decline, it’s still cheaper in the long run than paying rent.
It’s possibily a gamble if your plan was to buy low and sell high. My investments are limited to buying a property that will cashflow so it doesn’t matter what the market does in the short term, I make my money on the tax deductions and the rents cover my expenses and make a little money too. In that kind of situation, I can hold as long as I like and sell when the market conditions are right.
jd433.
The answer is DOWN! The market is still headed down and probably will be for another year. If you look at historical declines that occurred after a big boom, then this decline will last for another full year. Supporting that opinion is the fact that inventories are still rising and prices in most areas have not dropped significantly.
However, there is no point to trying to buy at the bottom. There won’t be a major announcement when the bottom occurs and you won’t even know it happened until months later. So, the point in EVERY market is to buy at a big discount. If you buy at 50%, 60%, or 70% of the market value, then it won’t matter if the market drops by 10%. You can still sell in a year and at a discount, and still make money.
If you are really experiencing fear about investing, then don’t do it. The TRUTH is that the vast majority of people who start any business fail. Most people are not self-motivated and don’t feel comfortable with the very real risks of running their own business. That’s why only 2.5% of Americans are millionaires.
Good Luck,
Mike
Great point about buying at 50%-%70% of the value. I have been hearing and reading for quite a while about how the market is crashing, crashed, and continues to crash. Blah blah blah. I even lost my main investor because his dad down in Tampa keeps sending him article after article about the doom and gloom.
It must be happening in some markets because all you hear about in the news is the “bubble” busting. However, in my area there has been no drop in prices, inventory levels are about the same, new home construction is all around and more and more people are buying and rehabbing homes in older neighborhoods. Like others have said: as long as you buy at the right price and make sure you have positive cash flow then you will be fine. The “doom and gloom” stories are good for one thing—they keep the number of competitors down! 
make no mistake, there is still plenty of rom in the downward direction in many markets. Real estate is a local and regional thing so you have to understand what is going on in your market(s). However, don’t believe these annoucements by the Realtors Assoc. of “we have reached the bottom”. We’re at least another year away from that (IMHO)
Today Fed chairman states housing in SEVERE downturn. Who did not see this coming? Housing is cyclical, always has been, always will be.
The people who consistantly do well as investors buy the down turns, hold for the ride out, and sell during the insanity.
I keep local newspaper articles that I find interesting during these market run ups. I have one from late 2004, a 2 bedroom cottage which basically needed to be torn down was placed on the market Saturday by owner for $250,000… By Sunday they had 70 people come to the open house, Sunday night they had 21 offers. Sold as is, no inspections, for…$315,000!!! Yea, that was gonna last.
The previous poster was right, if your buying anything for 50 cents on the dollar you’re going to do fine. But… Be careful this thing is a long way from over. IMO. Not the time for flipping, like catching a falling knife, be patient, buy cheap and rent. 10 years from now you’ll look like a genius. I’ve been doing this for 25 years NOTHING changes, people just have incredibly short memories.
Who cares where the market is headed. Buy the property right at a good discount and be able to rent it for a positive cash flow until the market turns back up. DOnt speculate. If you dont make money the day you buy it then just send me your money because when you dont know and are hoping prices will rise then you may be just throwing money out the window.
I tend to agree with dwj469; old chinese proverb, “where there is change, there is opportunity”.
This market has lead to great opportunities for investors to purchase discount property (with the high foreclosure ratios and high population of people in ARMs and exotics that may not be able to weather the adjustment).
While residential properties have fallen out of vogue (in some areas), commercial real estate has been recording record activities for the last 2-3 quarters (commercial lending is up 2.7 trillion dollars over last qtr).
While residential properties’ values might be slipping (in some areas), rent has been gradually increasing for the last 2-3 qtrs (due to lack availability [too many condo conversions] and pent up demand for rental properties due to raising interest rates).
As we speak today, interest rates were at a 15 month low last week…
So how is the market? It all depends on the where, what and how (much)…
Money is made in both up and down markets; adjust, adapt and go get you some…
Regards,
Scott Miller
P.S. Market timing doesn’t work and can’t be executed effectively/consistently in any investment strategy.
Our market is going up. It’s December and things are crazy. I’ve already have three sets of buyers come in town to purchase properties and we’re placing contracts.
CA,FL, and AZ investors were too crazy for a while and now the market is correcting itself. We’re stable, have good economic factors, and are rising. We should be able to keep ascending for at least the next 2 years.
As for the what wall street thinks…My college buddy is a major trader for mid sized hedge fund and they say 2007 will be the capitulation year for real estate…The are also short homebuilders,reits,and have %0 of fund money toward the long side of anything real estate or real estate related…Thats a heavy bet but if you look at things overall even with this minor pullback in prices RE is still incredibly overpriced…Here in NY we can easily use another 20-30% of downside…There is nothing in NY/Queens/Bronx/Brooklyn/etc that will even come close to cash flowing…With the current stock market and money market situations I remain clueless why anyone would park substantial money in RE now…I read about %7 cap rates and laugh (unless its a 1031 exchange)…Any money market fund is paying %5.25 and you can get stable bond fund to pay %6.75 and the money still reamins %100 liquid…Never mind if you get even more savvy and use closed end funds (cef’s)…They are more volatile but the monthly yields can get into the teens…And if you are hellbent on investing into real estate there are bunches of REITS that have hefty dividends and all the while your money still remains one key stroke away from being liquid…It’s slowly happening here but real estate isn’t anything like the stock market…The stock market can sell off and hit a bottom in a few months…RE takes years it seems…
The good thing I feel is if you are going to start a multi property long term income portfolio and you have patience it’s a decent time to get started…Money is still relatively cheap if you can locate a property that the numbers work on…Good Luck doing that…
Great post rookieNYC, I have never been able to figure out why anybody would invest in real estate in NYC or California.