Posted by: kandersen | August 16, 2009

Real Estate Bargains. Bloodbath or Godsend?

I have been closely watching real estate prices now for about 3 years. Ever since I went on a trip to Kauai Island in Hawaii. I have been smitten with its beauty. I have been more and more inclined to pull the trigger and actually buy a piece of property there on the island but have been a bit hesitant in doing so because the prices have been going down.

Why buy property now if the market is in a free fall? Well aside from the speak of the economic experts who cant seem to torture the numbers enough to show the economy is on the mend. In actuality it is not. There are a few reasons I think this is the case.

First off, and for the most part the United States does not really build anything anymore. We manufacture a few cars, but all but a few industries are still here. In fact almost everything is made in another country. In the past 20 years we have gone from a nation of builders to a nation of consumers.

Currently we aren’t consuming. In fact some of the things that have been going on have made people start paying off their debt load as soon as possible because a lot of credit card companies are doing terrible practices like hold your payment until its a day late so they can jack your interest rate up to 24%. People are getting caught with their pants down and are not liking it at all. In fact studies show that people are also starting to save their money now. Somewhat of a new trend for the average American. So if you couple people not buying, job losses will increase. Big box electronic store cant afford to keep the lights on if your not buying that shiny new big screen TV. A ripple effect for sure.

So recently we have seen the stock market rebound by leaps and bounds. But keep in mind that this is a bear market rally which means that it is not being sustained by any real economic recovery data. So the false sense of hope from the stock market is going to be a flash in the pan. Oh, I suppose I could be wrong, I have been before but I don’t think so this time and let me tell you why.

First off The banks still have a whole mess of “toxic” assets which they cant or wont unload and there’s more on their way. There is such a backlog of house foreclosures that haven’t even been processed yet because the banks are just inundated with them. there is more coming too. The next round of ARM loans are about to reset and the bulk of these homes will be worth less than what they are on paper. Most people who gambled on an ARM loan figured they would be able to sell the house or refinance the home before the ARM resets happened. In those cases the house didn’t sell and because the loan was more than the current value of the property.

People in these types of loans have no vested interest in the house. In a lot of the cases there was no down payment required to buy the house so they are not loosing anything but a torturous house payment if they walk away.

Now the next factor to play in here is that whole consumers not buying and job losses. After this bubble of house foreclosures we have to deal with a ultra massive commercial property bomb. Commercial property is on the same track because business is in a slump people are not able to keep their businesses open and that is setting the stage. Sometime in 2010 we should see the commercial property foreclosures coming into full swing. Once that happens who knows? We could see the complete unhinging of the economy.

We will have to wait to see what will happen then. My guesstimate is that its going to be ugly. which if your buying property then at the true bottom your going to have a wonderful opportunity to make some killer buys. If you buy now, you may loose your butt.

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