I’ve identified a couple of markets where I’m convinced there will be a decline in single-family dwellings in 24 months. I know, not what people here want to hear. But I’m not here to argue for or against a bubble, we all have our opinions on that.
How can one profit from an anticipation of a decline in a local market? I am not interesting in buying foreclosures after an area goes through a decline, that’s too late. I want to do it BEFORE the fact.
With stocks, futures and options, I’d know what to do. But what about residential real estate in particular markets?
If you feel that the RE market for the area will decline, why would you buy now? The only strategy the I can conceive at this point would be to buy waaaay under value. For example, if you feel that the market will tank by 20% then the most that you could pay would be 60% of retail after any repairs that need to be done. That way you would still have a 20 to 25% equity in the property while you are waiting for the property to go up. If you had to, you could sell for 90% of retail and not be hurt by it.