The trouble with gloom and doom is that when you're surrounded by it, that's all you can see. While most economists don't predict a depression, the prevailing thought is that we're in for a very bad recession with lots more foreclosures, job losses and many personal and business bankruptcies.
I'm not going to express my views about the insanity in Washington regarding the financial market and Detroit's Big Three bailouts. I will say the new President sure has inherited a mess (some would say it's a crime scene). His hands are full but I think he's got the moral support of the general population and I wish him (and all of us) the best. On the bright side, if history teaches us anything it's that this, too, shall pass. Everything changes, nothing is static. If you don't like what you're seeing right now, just wait a minute, it'll change.
I've been telling anybody that'll listen that it's time to buy real estate. Great deals are made when the market is in the tank and everyone is trying to sell. In the residential market, the number of home sales is increasing but prices are still flat or falling, although at a much slower pace. This is a sign that we're at or close to the bottom of the current real estate market cycle. Another sign of a market bottom is to look at who's buying houses these days, and who are the sellers. In housing it's mostly investors buying property directly from the banks.
I've been getting lots of calls lately from Realtors who know of commercial properties with owners that are in big trouble and need to sell. It's definitely a buyer's market and cash is king. We're always looking for more great deals as we raise capital to make it happen. The market will probably slide along the bottom for all of next year before signs of life become evident, if then. However, until there is liquidity in the lending market, nothing will change. Since banks and other commercial lenders are not making loans these days, owners have become much more willing to hold a mortgage on their property and you can get great terms from a motivated seller.
The bottom line is, there's lots of blood in the streets, with more to come, but the darkest hour is just before dawn. Sure, the market may languish for a while but when the recession ends and liquidity is restored to the financial markets, real estate prices will begin moving up again. And don't forget, we'll be seeing massive inflation in the next year or so. You can't print dollars like the Fed has in the last couple of months (and will continue to in it's battle to restore liquidity and end the recession) without increasing inflation. When inflation is on the rise, you'll want to be in assets that move with inflation, like real estate. Buy at today's super low prices and watch your wealth grow as inflation does its thing.
Take a look at the market cycle chart in my blog to get an idea of where we are in the current real estate cycle and where the market will head as the economy recovers. The cycles usually repeat about every six to ten years, but because of the extent of the mess the economy is in right now, and Congress being clueless about what to do, I think this one will be long in duration. Remember, the time to buy anything is when everyone else selling, whether it's real estate, stocks, cars, whatever. Those who move against the crowd now will be tomorrow's millionaires. It happens in every recession and it's happening again now. You can bet on it.
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