Here are some of my thoughts on the “Real Estate Bubble” as I see it.
I am going to break this down a bit . . .
Here are some reasons why prices on homes have fallen.
- Interest Rates
The Federal chairman changes the rates to keep a lid on Inflation. The rise in rates will really affect areas where prices are too high to begin with. Like parts of CA and New York.
Cities such as Chicago, DC, Boston. It wont really affect the South as much.
I do feel we are headed for a recession in 2010 in this county. If you follow history we had one in 1950, 1960, 1970, 1980, 1990, 2000, and so I feel 2010 is next.
- People who have are out of work.
Most blue collar states that build cars are hurting.
Erie PA, Lancing and Detroit, parts of Indiana prices are in some cases 30% of FMV. This may be a good buy and hold or buy and gamble area.
- To many darn Houses built and on the current market! :o
Their are lots of homes new and old on the market now. NAR says that in the US there are over 4 million homes on the market, this time last year only 3 million.
- Rehabbers, Fixers and Flipper - - Oh, MY 8)
Areas like FL went up in value this past year so a lot of investors tried their hand at flipping houses. Now there are just too many on the market! It happened in Miami, Las Vegas and other FL areas too. This is in direct competition with builders who are giving out incentives now like candy at Halloween.
Ok, so how can I avoid this so called “Bubble”
My best advice would to be “Not to put your eggs all in one basket”
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Buy homes in different up and coming areas such as the south.
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Stay out of areas where a regional bubble can happen.
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Don’t invest in areas that are sky high already.
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Put as little of your own money down as you can. Use Other Peoples Money. Leverage.
Over all I feel this down turn will last maybe 2 to 5 years.
I also feel that over time Real Estate will make you rich.
I welcome all comments and your professional thoughts on this topic!