Recent Article worth a Read . .
http://www.nytimes.com/2006/08/10/business/10housing.html?_r=1&oref=slogin
What are you thoughts about it? ???
It depends on your business model. If you buy houses at or near retail price and wait for appreciation to give you a profit (speculation) then you have a problem. If on the other hand you buy distressed properties at 50% to 70% of retail and fix them up, then even if the market stops you still have your profit because you made your profit it was not given to you.
My barometer is not the price of housing and the pace of home sales it is the strength of the job market. If people have jobs they won’t move away and they will rent from me. Even in an environment of increased foreclosures, that gives me a large supply of cheap houses, and those people that have been foreclosed on need a place to rent. That is the beauty of real estate. You win all the way around. The only way you won’t make money in real estate is if you are greedy or lazy. If you think of all the things that get investors into trouble it boils down to those 2 things. They don’t do the due diligence or don’t fix up the property well or at all because they are lazy, they buy a property that is bad and it costs them money. They let in a tenant that has a bad background because he waved a $3000 check under your nose and he kicks your walls in. You let him in because you were greedy. You pick the business model that requires no work, just buy it let it sit for a few months and sell it. That is lazy it will cost you when the bubble bursts.
Bluemoon touched on something that I believe will happen (and, in fact, is already happening). The population is still increasing in this country. Matter of fact, I believe there was a recent news story saying we are approaching 300 million people in the USA. First point, these people will need a place to live. While people may in fact vacate the home ownership market (wehter voluntarily or otherwise), they will still need to housing in one form or another. Another point worth mentioning is the fact that people seem to always talk of the real estate bubble interms of some all-inclusive meltdown. The fact is real estate is a regional/local commodity. What is happening in California or Arizona has little bearing on central Texas (except I’ve noticed an influx of California investors lately). So, while some markets are “correcting” themselves downward, others will see a reverse trend, IMHO. And so the cycle continues. I also think if there WERE a nationwide epedimic of sudden and sharp declines in housing prices, real estate would be the least of our worries as we’d probably be deep in a depression already due to residual markets.
Very Well Said, thank you so much for your valuable viewpoint. 
Guys if your smart, your buying now !!! There are more houses on the market now than ever a “buyers paradise” plus not to mention tons of renters and people who were priced out of the market or could not compete when idiots were paying top dollar and more for a home.
I’m buying properties in greater seattle area on average 18K less than the appraised value and in soem cases more for FSBO because they need to sale.
Don’t believe the hype; its the same scare that drove the market crazy with home flipping, people paying more than the property was worth.
Saw the following in this article:
So far during the first seven months of 2006, core consumer prices have risen at a 3.1 percent annual rate, compared with 2.2 percent in the comparable period of 2005. The department said about 80 percent of the acceleration in core prices was accounted for by rising costs of shelter, such as rents.
Hold on boys and girls!
In Michigan the job situation has gotten much worse. My brother has had to lower rents to keep his units rented (Ypsilanti). I have also seen several stories in the papers and in forums about homes being sold at a loss.
I should add that I believe there is always a way to make money in Real Estate, even when prices don’t rise - and even when they are falling.
However, I notice that among investors there is this unrealistic optimism about prices always going up. Perhaps because we once owned a home in a town where prices dropped for 20 years (Anaconda, MT), I am less optimistic.
I also can’t buy the idea that increasing population and jobs can automatically drive prices up. High enough interest rates (which will come again some day) make it virtually impossible for people to buy at higher and higher prices. In this case they will share homes, move to cheaper areas, buy mobile homes, etc, reducing demand.
In any case, nothing (not even houses and health care) can forever rise at a rate faster than inflation. Were it so, housing costs would eventually be 100% of your income - clearly impossible. Bursting bubbles are just metaphors, of course, and the reality is complicated. When higher-priced homes become too expensive to own their prices may drop while prices of low-cost homes are going up at the same time. For investors, higher interest rates and oter cost factors may drive more people to rent, making rentals a good investment - even if home prices are falling.
It will be an interesting few years coming up, I think.
I never do deals that require prices to move up. If it does not make money at what prices are now I don’t do it. I have a land trust deal going now that at the end of the trust I will sell the property to the resident beneficiary at $125k. The house appraises now at $127k. I don’t have to have 3% appreciation to get to $125k. The reason I do that is because I bought and fixed it up and only have $94k in it. I don’t have to speculate on what the prices are going to be in 2 years. I will get $300/month for 24 months and then sell it for a $31k profit. Total making a total of about $40k over 2 years using today’s prices on this one deal.