Thank God for Dancing with the Stars! Oh…and the Housing Market!

Greetings from Cedar Crest, NM…..It is getting cooler……leaves are changing…AND…..

This world is stinking crazy and it is getting worse….you think?  We have Brittany Spears doing everything she can to throw away here career. Then you have Ahmadinejad speaking at Columbia University….what is up with that?  O.J. Simpson gets busted for armed robbery….And to top it all off….the housing market is going down the toilet.  There is enough going on for us to just say "I give up" and throw in the towel….But do not do it…..do not fear….a new season of Dancing with the Stars is near!  Yes…I know ….it already started but….I wanted it to rhyme.

I have been reading a lot about what is happening with the housing market and how everyone thinks it will get worse.  Who really knows….but….the signs were there.  Not the signs you are thinking….but historical signs called cycles.  A while back I read a couple of books that gave some insight to the cycles of real estate, stocks, etc.  These books were Prophecy by Robert Kiyosaki and The Next Great Bubble Boom by Harry S. Dent.  Another book that foretold what is happening, at a much higher level, (Conspiracy theorist love this book)is The Creature From Jekyll Island by G. Edward Griffin.

What is interesting is that many people are crying "the sky is falling" which if you are/were a mortgage broker…this may very well feel like it.  BUT as an investor…..this is a great opportunity.  If you have been on my coaching calls for the last two years….you would have heard me say…."when things start going south….those that are liquid are going to have a hay day."  Now…I am not saying that being liquid is the only way….but having a line of credit or "ready cash" will give investors an upper hand when opportunities arise…especially in the market we are in. 

Now….for some strange reason….the downward spiral that is happening in the housing market has not hurt commercial real estate like I thought it would….is it a matter of time?….I am not sure…but my guess is yes.  Lenders have tightened up on lending for commercial real estate but not to the extreme we are witnessing in the housing market.

It is basic economics – Rob style….

We have an over supply of homes on the market today….now…take the homes that are being "dumped" into the market because of foreclosures….and now you have increased supply which result in huge value drops.  On top of that….put tight restrictions on money for home loans….and there goes "demand"…out the window.  High supply and low demand for homes….results in sinking values.  As values continue to plummet, home owners find themselves upside down on their mortgage.  Add ARM (adjusted rate mortgages) loans to the mix….and now you have home owners that cannot afford their increasing mortgage payment and they cannot refinance because the value of their home has dropped below what they owe…and now have to foreclose.  Now more homes are dumped into the market….and so on…and so on….

The interesting thing here is that…this will drive market rents up.  Not right away…but as people lose there homes and as people find themselves unable to finance a home….people will turn to rentals…rent to own…owner financed properties, etc.

Rental properties will show lower vacancy rates…increased market rents ….and opportunities for investors to supply rental properties to a growing "rent" market will flourish.

One point I want to make clear….we are in the initial stages of the market down turn.  It will get worse (my opinion) and the opportunities will get even better.  This is not that time to be an "early bird" per se….but it is the time to get ready…..

Until next time……rob

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